TLDR
- Morgan Stanley has named Coca-Cola its Top Pick in both North American beverages and consumer staples
- The firm sees stronger pricing power in beverages as inflation is expected to stay high with the Iran conflict
- MS has an Overweight rating and $87 price target on KO
- The Fairlife brand could grow at 25%+ annually and add over 100 basis points to organic sales growth
- 2026 guidance calls for 5–6% FX-neutral earnings growth, but Morgan Stanley thinks results could come in higher
Coca-Cola has been named the top pick in North American consumer staples by Morgan Stanley, which also put the stock back at the top of its beverages coverage. The firm has an Overweight rating and an $87 price target on KO.
The upgrade comes as Morgan Stanley says it prefers beverage companies over food and household product makers. The bank argues beverages offer better pricing power and more room for innovation. With inflation expected to stay elevated due to the ongoing Iran conflict, pricing strength is seen as a key differentiator.
Morgan Stanley’s 2026 outlook for Coca-Cola includes 5–6% foreign-exchange-neutral earnings growth, based on 4–5% organic sales growth. The firm thinks that guidance may actually be conservative, and that results could beat the forecast as demand trends pick up.
The bank also expects U.S. scanner data — a measure of retail sales — to improve this year. Part of that improvement is expected to come from easier year-over-year comparisons after consumer boycotts dented sales in parts of 2025.
Over the longer term, Morgan Stanley sees Coca-Cola sustaining organic sales growth in the mid-single-digit range. That would put it ahead of most consumer staples peers.
The firm points to several reasons for that confidence. Coca-Cola has been raising prices more consistently than rivals. It has strong brand recognition, growing market share, and has been spending more on marketing in recent years.
The company also benefits from operating in categories and markets where private-label competition is limited. That gives it more stable pricing conditions compared to, say, packaged food companies.
Fairlife: The Under-the-Radar Growth Driver
One area Morgan Stanley flagged specifically is the Fairlife brand. The dairy-based beverage business is estimated to grow at more than 25% annually. The firm says it could contribute more than 100 basis points to Coca-Cola’s overall organic sales growth.
Demand for protein drinks is rising fast, and Fairlife has been gaining ground thanks to its filtration process and Coca-Cola’s distribution network. Morgan Stanley called it an underappreciated asset on the balance sheet.
The bank also pointed to Coca-Cola’s track record of growing volume even as it raises prices. That’s not easy to do, and the firm attributed it to product innovation, execution, and consistent market share gains.
Prior Stop-Out Behind It
Morgan Stanley had previously removed Coca-Cola from its Top Pick list, describing the earlier move as “timing-driven.” The firm has now reversed that, reinstating it at the top of both its beverage and consumer staples rankings.
At the time of the note, KO was trading up 0.89% on the session.
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