Buy Coca-Cola Stock After Its Stellar Q2 Earnings

Coca-Cola (NYSE:KO) is back! The Atlanta-based beverage giant just released impressive second quarter results, and KO stock is trending upwards.

KO stock: Close-up of Coca Cola drink cans lying on paper background

Source: Elvan /

Coke’s sales rebound was much stronger than expected as the Covid-19 pandemic retreats and businesses reopen around the world. Coke reported that its revenue jumped 42% to $10.1 billion in the three months ended June 30. That was greater than the $9.3 billion in sales forecasted by Wall Street.

The company’s net income surged 48% to $2.6 billion. Coca-Cola announced earnings per share (EPS) of 68 cents, more than 20% higher than the 56 cents EPS that analysts expected.

With the U.S. and global economies not yet running at full capacity, it looks like there is plenty more upside for KO stock through the rest of this year and into 2022.

Global Demand and KO Stock

Demand for Coca-Cola’s signature soft drink and other beverages is not confined to the U.S. Some markets, such as China, Brazil and Nigeria, are now running ahead of 2019 pre-pandemic demand.

To be sure, some countries like India are still under pressure from the pandemic and demand in those regions remains weak. But overall, Coca-Cola is seeing demand for its products rise extremely fast as we move into the year’s second half.

Coke reported that its Q2 global case volumes grew 18% from a year earlier and led to greater revenue than in 2019. In the U.S. and Canada, case volumes rose 17% as restaurants, movie theatres, stadiums and other venues reopened. Coca-Cola has traditionally generated half of its revenue from restaurant and venue sales.

In addition to its soft drinks, the company said U.S. demand for Powerade was exceptionally strong in the second quarter. Case volumes for sports drinks were up 35% from the same period in 2020.

Looking forward, Coca-Cola raised its full-year earnings guidance based on the results achieved between April and June. Coke now expects organic revenue growth of 12% to 14% in 2021, up from the high single-digit growth it expected earlier. The company also anticipates earnings per share growth of 13% to 15%.

The strong earnings and raised guidance drove KO stock nearly 2% higher to $57.02 per share before the markets opened the next day. So far this year, the company’s share price has risen 4.5%. The stock price is up 17% over the past 12 months.

Reputation and Marketing

Coca-Cola has a big opportunity to burnish its brand with the Summer Olympics in Tokyo, Japan. The company, which spends about $4 billion on advertising annually, is the oldest continuous sponsor of the Olympic Games.

In Tokyo, Coke has partnered with 14 American Olympians to market six of its leading brands. Athletes such as swimmer Caeleb Dressel and soccer player Alex Morgan will promote Coca-Cola products like Vitamin Water, Powerade and Coke itself.

Coca-Cola says Powerade “will have its biggest-ever presence at the Olympic Games in Tokyo.” The sports drink will be featured prominently in advertisements involving American track and field athletes.

The company could use the positive marketing after Coke was snubbed by international soccer star Cristiano Ronaldo during a Euro 2020 press conference in June.

Buy KO Stock on the Upswing

Another great reason to buy KO stock is the company’s dividend payout. Coca-Cola is what’s known as a “dividend aristocrat.” The company has increased its dividend for 59 consecutive years. Currently, Coca-Cola pays a dividend yield of 3%. The company has spent 90% of its free cash flow on dividend payments in the past year.

Coca-Cola is also an increasingly diverse beverage company. It now sells teas, juices, sports drinks and bottled water in addition to its flagship soft drink. This array of products is helping to keep Coke’s global sales strong.

With its stock breaking out following the company’s blowout earnings, now is a good time for investors to add KO stock to their portfolio. Coca-Cola’s earnings are likely to remain strong through the remainder of this year and beyond, and the Summer Olympics should provide another boost. Add in the strong dividend payment and increasingly diverse product line, and it’s easy to see why Coke is stock to buy and hold for the long-term.

Disclosure: On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia. 

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