{"id":19308,"date":"2026-03-03T18:31:41","date_gmt":"2026-03-04T00:31:41","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=19308"},"modified":"2026-03-03T18:31:41","modified_gmt":"2026-03-04T00:31:41","slug":"coca-cola-earnings-quality-still-not-great","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=19308","title":{"rendered":"Coca-Cola: Earnings Quality Still Not Great"},"content":{"rendered":"

It’s been a little over a year since writing about Coca-Cola’s (KO) earnings quality<\/a> and since then, after the calendar 2025 year, it appears not much has changed for the Atlanta carbonated soft drink giant.<\/p>\n

Recently, Coke has run up into the low $80’s in terms of it’s share price, a lot of the move beginning with the bounce off $67.50 in early January ’26, probably in response to the weakening technology and large-cap growth trade that began late in Q4 ’25 and continued after the start of 2026.<\/p>\n

The stock is at a new all-time-high, which sits well with investors no doubt, but the fundamental analysis of Coke rates about a C+, if that.<\/p>\n

To cut to the chase, hare’s an updated look at Coke’s net income to cash-flow over the last 5 years:<\/p>\n

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(Please expand the above spreadsheet)<\/p>\n

Both the cash-flow and free-cash-flow have continued to deteriorate relative to net income.<\/p>\n

There has been little improvement.<\/p>\n

Coke is dealing with a couple of internal issues which might be having an impact on the balance sheet including a rather sizable dollar dispute with the IRS that dates all the way back to 2007 – 2009 and puts Coke at risk for $6 billion in back taxes. Another issue although the risk is far smaller in dollars, is a “brand” issue from Fairlife, which is now a billion brand for Coke documenting animal abuse and deceptive marketing.<\/p>\n

Here’s what’s a little puzzling:<\/p>\n

Coke’s operating margin:<\/p>\n