Key Points
Global volume rose 5%, with Coca-Cola Zero Sugar up 16%, suggesting demand, rather than price alone, is behind the growth.
The home-market weakness came from water, sports drinks, coffee, and tea, while the Coca-Cola brands themselves grew.
Wider margins and raised free cash flow and earnings guidance give management room to address the weak spots.
There was a lot to like about Coca-Cola (NYSE:KO) and its third-quarter earnings report on Tuesday. The company grew its global revenue by 7%, and unit case volume was up 5%, with strong demand in Latin America, Asia Pacific, and its Europe, Middle East, and Africa segment.
But closer to home, there's a problem. North American sales volume was flat year over year, making the domestic market Coca-Cola's weakest geographic operating segment. And that weighed on Coca-Cola stock, with shares down 1% in early afternoon trading.
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Now investors need to consider how long Coca-Cola can rely on international markets to drive its growth, and what it needs to do to spur sales in North America.
Image source: Coca-Cola.
Coca-Cola delivers another strong quarter
Revenue in the third quarter was $13.4 billion, up 7% from a year ago. Organic revenue, which excludes the effects of acquisitions, divestitures, and currency fluctuations, also increased 7%.
Adjusted earnings per share reached $0.91, an 11% improvement from the previous year.
But the most encouraging number may be the increase in beverage volumes. Coca-Cola's 5% global volume growth demonstrates that consumers are buying more drinks, rather than the company relying entirely on higher prices to generate additional revenue.
And some of its most recognizable products are doing particularly well. Volume for Coca-Cola Zero Sugar jumped 16%, while the flagship Coca-Cola brand grew 5%. Diet Coke and Coca-Cola Light increased 6%. Water volume climbed 8%, while sports drink volume declined 3%, and coffee and tea volumes were unchanged.
International markets provided much of the momentum. Latin America and the Asia Pacific each recorded 6% volume growth, while Europe, the Middle East, and Africa recorded 5% volume growth. Latin America's organic revenue surged 16%, helped by higher prices and a favorable product mix.
Those are encouraging results for a company that has spent decades building a distribution network capable of reaching consumers around the world.
North America needs some attention
Coca-Cola's home market told a different story. North American revenue increased just 3%, while unit case volume was unchanged from a year ago. That's a noticeable slowdown from the second quarter, when North American volume grew 3%.
The weakness wasn't necessarily in Coca-Cola itself. The company reported higher volumes for its trademark Coca-Cola products, but those gains were offset by declines in water, sports drinks, coffee, and tea. So, consumers haven't suddenly stopped drinking Coke. But some of the company's other beverage categories are struggling to generate growth.
"Diet Coke and Coca-Cola Zero, especially Coca-Cola Zero, growing double digit again, and fairlife continues to do really well," CEO Henrique Braun told analysts during the company's earnings call. "Powerade also grew, and we have other areas that we have work to do, which is always good for us also to instill here our motto of being constructive with discontent that there are areas for us to work on."
What should Coca-Cola investors do?
Despite the North American slowdown, Coca-Cola's financial performance gives investors plenty of reasons to be encouraged. The company's operating margin expanded to 33.4% from 32% a year earlier. Its comparable operating margin also improved to 32.9%, up from 31.9% last year.
And Coca-Cola continues to generate gobs of cash. Free cash flow reached $11.4 billion through the first nine months of 2026. Management now expects at least $13 billion for the full year, up from its previous forecast of approximately $12.4 billion.
The company also raised its outlook for adjusted earnings growth to at least 11%, compared with its previous projection of 9% to 10%.
For long-term investors, those results matter more than one disappointing regional volume figure. Coca-Cola is increasing sales, improving profitability, and generating the cash needed to support its dividend and invest in future growth.
But North America deserves attention. International markets can keep Coca-Cola growing, even when its home market struggles. Getting domestic consumers to buy more of its beverages would provide the company with another source of growth -- and make an already strong business even stronger.
Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.