Coca-Cola is compounding earnings near 7% to 10% a year, but at 26 times this year's profit the stock already pays for it. I expect about $86.94 in twelve months, close to today's price, plus a 2.5% dividend.
Key points
- 26 times 2026 earnings estimate of $3.29 a share; the stock yields 2.5% against a 5.3% ten-year Treasury.
- $3.70 a share is my forward earnings estimate for late 2027, up about 7% a year after 2026.
- $86.94 target, 1% above $85.90; with dividends the total return is near 3.5%.
The call
The price asks for steady, low-risk growth and does not leave room for error. At $85.90 the stock trades at 26 times my 2026 earnings estimate. A rich multiple needs earnings to keep compounding near 7% a year.
I think the business delivers that, but not more. Unit-case volume grew 5% in the second quarter, partly on easy comparisons, weather and the World Cup. Guidance already rose. The sale of African bottlers trims profit, and Asia Pacific price/mix fell 9%.
12-month price by earnings multiple ($ a share)Own arithmetic: $3.70 forward EPS estimate times multiple. Price $85.90 on Oct 7, 2026.
Valuation
| Step | Figure |
|---|
| 2026 comparable EPS (profit per share) | $3.29, up 9.5% on $3.00 |
| Growth after 2026 | 7% a year |
| Forward EPS, late 2027 | $3.70 a share |
| Multiple | 23.5 times |
| 12-month target | $86.94 a share |
I use 23.5 times because the stock has earned a premium for safety, but a 5.3% risk-free yield caps how far the multiple can stretch. The multiple falls from 26 times today to 23.5 times on forward earnings, which cancels most of the earnings growth. The range is $78 to $96 for 21 to 26 times, roughly even on each side, so a hold fits.
Risks
- IRS transfer-pricing loss: about $14 billion of exposure against a $529 million reserve. Watch the appeals ruling and the 10-Q tax note.
- Weaker volume: affordability cuts may not bring lasting volume. Watch Asia Pacific price/mix and India share at the October 27 earnings.
- Upside risk: if bond yields fall, a 26 to 28 times multiple holds and the stock runs past $95. Watch the ten-year Treasury yield.
What would change my mind
A ten-year yield below 4.5%, or volume growth holding at 4% or more on harder comparisons, would make me more positive; a tax loss or a share price near $75 would change it too.