Coca-Cola Consolidated, Inc. (COKE) stock intrinsic value fair value estimate & owner earnings analysis

Coca-Cola Consolidated is the largest Coca-Cola bottler in the United States. Under comprehensive beverage agreements with The Coca-Cola Company (the territory exchanges were completed in October 2017) it holds exclusive rights to make, sell and distribute Coca-Cola brands across 14 states and the District of Columbia, a business the company has run since 1902. Volume has been roughly flat for years; almost all of the profit growth since 2020 came from price and mix, with operating margin rising from about 6 percent in 2020 to about 13 percent in 2023 through 2025. In November 2025 the company paid about $2.4 billion to buy back the 25 percent stake held by The Coca-Cola Company, funded with new borrowings, which cut the share count by about a quarter and turned a nearly debt-free company into one with roughly $2.5 billion of borrowings. How we measure the earnings. We start from the cash the business generates after taxes and after the capital spending needed to stay in business, remove swings in working capital (including the 2020 to 2022 payroll-tax deferral and repayment), and then add back interest paid, because the lenders are valued separately. Two judgements matter. First, the company pays The Coca-Cola Company roughly $69 million a year (2025) in sub-bottling payments for territories it acquired; accounting classifies these as financing and they sit outside operating cash flow, but they continue for as long as the company operates those territories, so we treat them as an ordinary operating cost. The non-cash charge that adjusts the liability for these payments ($131.9 million in 2025) is added back as a non-cash item, and the liability itself ($717.9 million at year-end 2025) is not subtracted a second time. Second, in 2024 and 2025 the company earned about $60 million a year of interest on its large cash balance; that cash was spent on the buyback, so we exclude that income from the business earnings. The long-term incentive plan for the chief executive (about $10.7 million of expense in 2025) is already largely settled in cash and not added back in cash flow, so it is not deducted twice. The starting level. On this basis, cash earnings before interest were roughly $367 million in 2021, $364 million in 2022, $489 million in 2023, $451 million in 2024 and $587 million in 2025. We anchor on the middle year of 2023 through 2025, about $489 million a year (about $7.35 per share on roughly 66.5 million shares). We start the window in 2023 because that is when the post-pandemic price and cost reset showed up in margins; earlier years describe a business earning half the margin and, before October 2017, a smaller territory. The anchor sits about $100 million below 2025's actual result, on purpose: the first half of 2026 shows the squeeze that the next paragraph describes. Growth check: the actual increase in business cash earnings in 2025 was about 30 percent; our base case assumes 3 percent in year one, which is below it, so nothing in the near-term path needs a specific reversal to hold. What the first half of 2026 shows. Sales rose 13.5 percent, but that includes six extra calendar days (about 9.7 percent without them); second-quarter volume rose 7.6 percent, helped by a July Fourth timing shift. Profit did not follow: second-quarter gross margin fell to 37.9 percent from 40.0 percent as aluminum cost about $45 million more in the quarter (supply constraints, tariffs), and second-quarter operating income was flat. The company repaid $275 million of term loans in 2026 and held $172 million of cash at July 3, 2026. We read this as a cost squeeze not yet fully passed through in price, not as a change in the level, and we credit no recovery. Debt. At July 3, 2026 the company had about $2.5 billion of borrowings against $172 million of cash, a net debt of about $2.35 billion. Maturities are $100 million of notes in October 2026, term loans due December 2028 and December 2030, $700 million of bonds due June 2029, $150 million of notes due March 2030 and $500 million of bonds due June 2034. The bank agreements carry two coverage covenants that the company met at year-end 2025 and that it does not expect to restrict it. Interest costs run near $120 million a year, close to the cost of a long-term bond, so we make no adjustment for expensive or cheap debt in the base and bull cases. The large December 2028 maturity lands in the middle of the bear case. Bear case: $74.67 per share. The named episode is 2018, when aluminum tariffs, wages and freight rose faster than prices, the company posted a net loss, and business cash earnings fell by more than half in a year. We repeat a squeeze of that kind: earnings fall to 70 percent of the starting level in year one and 60 percent (about $293 million) in year two, recover to 90 percent by year five as pricing catches up as it did after 2018, grow 1.5 percent a year through year ten, and stay flat after that. The business is worth about $7.4 billion, the company owes about $2.35 billion plus about $50 million of extra interest from refinancing the 2028 term loan in the trough, leaving about $5.0 billion. Trough business cash earnings of $293 million still cover the roughly $120 million interest bill about 2.4 times. Base case: $148.68 per share. Cash earnings start at the $489 million level and grow 3 percent a year for five years, 2.5 percent for years six to ten, and 1.5 percent afterward. The evidence is the exclusive, long-running franchise and a record of passing through price increases: net sales grew about 4 percent a year from 2023 to 2025 with margins holding near 13 percent. We credit price only, at or below that record, tapering as it matures. The business is worth about $12.2 billion, the company owes about $2.35 billion, leaving about $9.9 billion. We left out volume growth (Q2 2026 volume is distorted by the calendar), margin recovery, new brands, and any benefit from the supply-chain investment program (about $300 million of capital spending guided for 2026), because none of these is secured or demonstrated yet. Bull case: $220.21 per share. Cost increases are recovered through pricing as they were after the 2021 to 2022 inflation, so earnings return to the 2025 level of about $587 million immediately, then grow 4 percent a year for five years (the 2023 to 2025 sales growth rate), 3 percent for years six to ten, and 2 percent afterward. The business is worth about $17.0 billion, the company owes about $2.35 billion, leaving about $14.6 billion. What could make this wrong. The company can only sell Coca-Cola brands and must meet minimum volume and capital spending obligations, and The Coca-Cola Company has approval rights over any sale of the business, so one franchisor sets the boundaries. The founding family controls the vote, leaving outside holders no practical influence. Operating margin is at a record, and 2018 shows how quickly it can reverse. We cannot reconcile all of the sub-bottling payment path: payments were $28 million in 2023 but $64 million in 2024 and $69 million in 2025, and the filing ties them to cash flows in the acquired territories rather than a fixed schedule. Prior figures were built on a different basis and are not comparable. Margin-of-safety price: $60. Our confidence in the earnings level is good but not high: five years of rising results on a stable product, but a record margin, one franchisor and a leveraged balance sheet. The worst plausible outcome is a repeat of 2018 on top of a larger debt load, or a dispute with The Coca-Cola Company over territory terms that no case models. The structure survives that: the debt is unsecured, staggered over 2026 to 2034, and trough earnings cover interest more than twice, though a sustained squeeze with the 2028 maturity would make owners absorb costlier refinancing. If we are wrong about the three things most likely to go wrong, namely price recovery of aluminum and wage costs, the sub-bottling payments growing faster than earnings, and the margin holding, the shares would be worth about the bear value, roughly $75. The price assumes a five-year holding period. Over that time the business pays only about $1 a share in dividends, but it generates roughly $5 to $6 a share a year after interest, which pays down debt and accrues to owners. From $60 the base path implies roughly 25 percent a year over five years and the bear path roughly 10 percent a year; a higher price removes the bear-case cushion that the leverage and the single-franchise structure call for.