Coca-Cola shares slip on fourth quarter revenue miss

Coca-Cola reported Q4 adjusted EPS of $0.58 (vs. $0.56 expected) but missed top-line expectations with revenue of $11.82 billion versus $12.03 billion consensus, its first revenue shortfall to estimates in five years. Net revenue rose 2% year-over-year and organic revenue increased 5%, with global unit case volume up 1% in the quarter and flat for the year; full-year 2025 net revenue was $47.9 billion and EPS $3 (up 4%). Management guided 2026 organic revenue growth of 4–5% and comparable EPS growth of 7–8%, while Jefferies flagged a larger-than-expected FX headwind, called the guidance conservative but appropriate, and reiterated a Buy. The mix of a revenue miss and modestly positive EPS/guidance drives a cautious near-term investor reaction.

Analysis

Market structure: The revenue miss is primarily an FX story and short-term demand/pricing mix issue rather than a structural volume collapse — organic revenue +5% and global unit case volume +1% show underlying demand resilience. Winners: concentrate suppliers, bottlers with pricing flexibility, and FX beneficiaries (USD-hedged investors); losers: FX-exposed top-line continuity and any beverage peers with weaker volume stacks. Cross-asset: expect small defensive equity flows into staples, modest compression in KO implied vols (short-term), and marginal pressure on EM FX and commodity inputs (sugar, aluminum) if beverage demand softens regionally.

Risk assessment: Tail risks include aggressive regional sugar/soda taxes, a major bottler liquidity crunch, or USD appreciation wiping 200–300bp off reported growth in 12 months; probability low but impact high. Immediate (days): share reaction to guidance/FX headlines; short-term (weeks–months): margin and buyback signaling; long-term (quarters–years): execution on pricing/mix and structural volume growth. Hidden dependencies: bottler inventory/capex cycles, FX hedging resets and concentrate shipment timing can create lumpy reported revenues. Key catalysts: Q1 2026 trading update, bottler earnings (next 30–90 days), and major FX moves (>2% USD shifts).

Trade implications: Direct play: establish a modest long in KO (2–3% portfolio) on any 3–7% pullback, target 6–12 month horizon and a 10% stop-loss; dividend cushions downside. Pair trade: long KO / short PEP (1:0.5) for 3–6 months to express beverage recovery vs snack-exposed downside, exit on 8% relative move. Options: if volatility remains subdued, buy 6–9 month KO 10% OTM call spread (size 0.5–1% notional) if shares gap down >5%; alternatively sell covered calls (3 month, 2–3% OTM) to harvest yield if long.

Contrarian angles: Consensus focuses on headline revenue miss but misses that organic growth and volume trends are intact and 2026 guidance is intentionally conservative — this implies downside overreaction risk. Historical parallels (past KO FX-driven misses) show mean reversion within 3–9 months as currency effects normalize and buybacks continue. Unintended consequence: investor pressure for larger buybacks could temporarily boost EPS but mask underlying top-line exposure; monitor bottler capex and FX hedge roll in next 90 days.

Key Decisions for Investors

• Establish a 2–3% long position in KO on any 3–7% share-price pullback, hold 6–12 months, target +10% upside or collect dividends; use a 10% stop-loss or hedge with a 6–9 month 5% OTM put.
• If KO drops >5% intraday within 30 days, buy a 6–9 month call spread (buy 10% OTM, sell 20% OTM) sized to 0.5–1% of portfolio to capture guidance upside while capping premium.
• Initiate a relative-value pair trade: long KO and short PEP at a 1:0.5 ratio sized to 1–2% net exposure for 3–6 months; close on an 8% relative move or at next quarter results.
• If holding KO, sell 3-month covered calls 2–3% OTM to enhance yield; if knocked off, redeploy proceeds into the call-spread opportunity above or add to long on any subsequent FX-driven weakness.