Coca-Cola Wins the Quarter With the Help of Smartwater and Fairlife Brands

Coca-Cola (NYSE: KO) stock took a solid bounce following the third-quarter earnings report it delivered on Oct. 21. The company notched a solid increase in adjusted revenue and earnings per share. While there were pockets of softness, the report was enough to please investors. The stock has lagged the broader market in 2025, but is up 12.5% year to date at the time of this writing.

The quarter demonstrated the strength of Coca-Cola's diverse portfolio, which includes 30 billion-dollar brands, and especially the power of premium offerings like Smartwater and Fairlife, whose strong sales contributed to higher margins.

For investors who hold Coca-Cola stock for its dividend, the company's large brand portfolio provides steady annual sales and earnings that have allowed management to keep its 63-year streak of annual dividend hikes alive even during periods of weaker consumer spending.

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Coca-Cola's premium brands delivered

Coca-Cola's unit case volume increased 1% year over year in the third quarter, reversing the second quarter's 1% decline. But higher prices and a shift in sales mix to premium brands helped boost adjusted operating income by 15% year over year.

Overall, sales performance across the brand portfolio was mixed. Trademark Coca-Cola is a high-margin business, but it only posted a 1% increase in sales for the quarter. Sales of water, sports, coffee, and tea grew by 3%, while juice, dairy, and plant-based beverages saw a 3% decline.

However, Coca-Cola excels at marketing and adjusting its selling prices to deliver optimal growth in both the top and bottom lines. The company's total growth in the quarter was mostly driven by a 6% increase in selling prices and a shift in demand toward premium brands, including Smartwater and Fairlife, which accounted for a third of the price/mix increase.

Despite a challenging sales environment overall, the company's large brand portfolio allows management to lean into whatever categories are strongest at any given time. With Fairlife in particular, Coca-Cola is tapping into the growing demand for more protein-centric beverage options.

Over the long term, management is confident in its ability to deliver adjusted revenue growth between 5% to 6% on an annualized basis, which would be consistent with its third-quarter results, while growing adjusted earnings at around 8% annually.

The diversity of brands and management's ability to adjust prices to keep its margins up is why Coca-Cola is a solid dividend stock. Coca-Cola benefits from operating in a beverage industry that can be resilient to macroeconomic headwinds. The company has gained market share for 18 straight quarters, and management still sees ample room for growth.

John Ballard 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.