COKE — Q2 2026 Financial Report Analysis

Overview

Coca-Cola Consolidated, the largest Coca-Cola bottler in the United States (it makes, sells and delivers Coca-Cola and other brands across 14 states and the District of Columbia, and is a separate listed company from The Coca-Cola Company itself), sold a lot more drinks in the second quarter of 2026 (the three months to July 3, 2026). Case volume rose 7.6% and net sales rose 10.6% to $2.05 billion. Profit did not follow: aluminum can costs added about $45 million, more than the year's price increases recovered, so operating income was flat at $271.3 million. Net income fell 15.2% to $158.8 million because interest costs rose after the company borrowed to buy back The Coca-Cola Company's entire stake in late 2025. Earnings per share still rose 10.7% to $2.38, but only because there are about 24% fewer shares to divide the profit between.

At a glance

• Volume +7.6%, net sales +10.6%. Demand was strong across fizzy drinks and still drinks. Roughly 1 point of the volume growth came from the Fourth of July holiday falling inside this quarter, according to management's estimate.
• Gross margin down 2.1 points to 37.9%. About $45 million of extra aluminum cost (tariffs, supply constraints and geopolitical conflicts, per the filing) explains almost all of it: that sum alone equals about 2.2% of quarterly sales.
• Net income -15.2%, EPS +10.7%. The gap is the November 2025 $2.40 billion buyback of The Coca-Cola Company's 18.8 million shares. It cut the share count, but replaced interest income on cash with interest expense on debt.

Results summary

Operating margin is the share of sales left after paying for the drinks and for running the business, before interest and tax. Prior-year share figures are on a post-split basis (a 10-for-1 stock split took effect in May 2025). Both quarters cover the same 13-week span, so unlike the first half of the year there are no extra selling days distorting this comparison.

Volume and pricing: where the sales growth came from

The 10.6% sales increase splits into roughly three parts:

• Volume did most of the work. Management says sparkling growth was "broad-based... led by our zero-sugar and flavor offerings", and that still-drink growth was driven by Core Power, Powerade, smartwater and Monster. Part of the still growth was Dasani multi-pack water, which sells for less per case than other still drinks, which is one reason still sales per case rose less than sparkling. The CEO credited demand around the America250 celebrations and the FIFA World Cup, and management estimates the Fourth of July timing added about 1% to volume.
• Pricing added a modest ~2.5% per case. Dividing bottle/can sales by cases gives about $19.28 per case versus $18.81 a year ago. The filing attributes this to "annual pricing actions". That is a fairly light price increase for a year in which can costs jumped, and the company's COO said it is "focused on delivering affordability to consumers" in the second half, which suggests no large catch-up price rise is planned.
• Channel mix: sparkling growth came mainly from multi-pack take-home cans in large stores, club and value channels; still drinks were strongest in convenience and value stores.

Costs: aluminum ate the price increase

Cost of sales rose 14.5%, almost twice as fast as volume (+7.6%), so cost per case rose roughly 6%. The filing names aluminum as the main driver, costing about $45 million more than a year earlier, "which outpaced our annual pricing actions." Commodity inputs the company buys for its own production (cans, plastic bottles, CO2, sweetener, labels; excluding concentrate) are only about 20-25% of annual cost of sales, so a sharp move in one of them can still swing margins hard. The company estimates that a further 10% rise in aluminum, PET plastic resin and high-fructose corn syrup prices would add $35-45 million of cost over the next 12 months.

Selling, delivery and admin costs rose 7.8%, a little slower than sales, so they fell as a share of sales from 25.4% to 24.7%. The drivers were a base-pay increase for front-line workers that took effect at the start of Q3 2025, annual wage increases, higher benefit costs, higher fuel and the extra volume. Labor is about two-thirds of this cost line.

The 2025 buyback of Coca-Cola's stake

On November 7, 2025, the company bought all 18,835,460 of its shares held by a subsidiary of The Coca-Cola Company for $2.40 billion and retired them; The Coca-Cola Company no longer owns any shares and lost its board-nomination right. It paid with cash on hand plus a bridge loan, later refinanced with $1.35 billion of three- and five-year term loans. The board also cut its separate open-market buyback authorization from $1.0 billion to $400 million; no shares were bought under it in Q2 and $136.3 million remains.

Since then the company has been paying debt down: $275 million of early term-loan repayments in the first half ($125 million in Q2), taking total debt from $2.79 billion at year-end to $2.51 billion. Cash fell from $1.22 billion a year ago to $171.7 million. S&P rates the debt BBB+ with a negative outlook; Moody's has it at Baa1, stable.

What the headline numbers hide

• EPS growth is entirely the buyback. Net income fell 15.2%. Spread over last year's 87.2 million diluted shares, this quarter's profit would have been about $1.82 per share, a 15% decline; the actual $2.38 comes from having 66.6 million shares. The cost of that is visible in interest: net interest expense rose from $5.9 million to $30.5 million, both because interest income disappeared with the cash and because debt is higher. After tax that swing is worth roughly $18 million, close to two-thirds of the $28.6 million drop in net income.
• The adjusted figures exclude two non-cash items, and they matter here. The company's non-GAAP ("adjusted") results strip out (1) a $24.7 million charge from revaluing future payments it owes Coca-Cola for territories acquired in 2017 (an accounting liability now worth $760.4 million; it rose this quarter mainly because those territories are now projected to generate more cash), and (2) a $13.6 million mark-to-market loss on commodity hedges. On that basis operating income grew 5.5% and adjusted net income fell 3.8%. The headline adjusted EPS of $2.83 (+26%) is on a basic-share basis and also benefits from the smaller share count.
• Cash conversion is good. Operating cash flow for the first half was $420.6 million against $270.4 million of net income (1.6x), helped by the non-cash charges above. After $147.4 million of capital spending, free cash flow (cash left after investment) was about $273 million, up from about $249 million.
• One-offs: the Fourth of July timing (~1 point of volume) flatters this quarter and will work against the third quarter. The first half also had six extra days (worth about $30 million of operating income per management), which is why first-half operating income was up 10.2%; the fourth quarter will have six fewer days, so the full year evens out.
• Working capital: the cash drag from working capital was larger this half ($39.7 million vs $17.8 million), but receivables and inventory are only reported against December, when sales are seasonally low, so we can't cleanly tell whether they grew faster than sales.

Takeaway: Coca-Cola Consolidated's business is growing faster than it has in a while (volume +7.6%), but this quarter none of that reached the bottom line: aluminum costs swallowed the price increase and higher interest on buyback debt took net income down 15%. The 10.7% EPS gain is a share-count effect, not an operating one.

Outlook

The company gives no earnings guidance. What it does say: capital spending of about $300 million for 2026 (versus $147 million spent so far), sub-bottling payments to Coca-Cola of $70-80 million this year, and, from the COO, that cycling last July's front-line pay increase "will moderate operating expenses growth for the remainder of the year."

Our read: the third quarter (10-Q due around late October, based on last year's October 29 filing) should show slower SD&A growth as that pay increase laps, which is the clearest path to margin recovery. Against that, the quarter loses the Fourth of July benefit, and nothing in the filing suggests aluminum costs have eased; with management emphasizing affordability rather than further price rises, gross margin pressure likely continues. Interest expense should edge down as term loans are repaid, but it will stay well above 2025 levels. Three things to watch: whether volume growth holds above ~5% without the holiday and World Cup tailwinds, whether gross margin stabilizes near 38%, and the pace of further debt repayment given S&P's negative outlook.