The beverage industry is growing amid improved demand trends, market share gains in at-home and away-from-home channels, and continued innovation.
Due to rising awareness about the adverse effects of alcohol on health, people have started to shift towards non-alcoholic and low-alcoholic beverages and cocktails. This changing preference toward healthy beverages will likely stimulate lucrative opportunities for companies in this space.
According to a report by Fact.MR, the demand for low-alcoholic beverage products is projected to increase at a 4.5% CAGR to $1.2 billion by 2033. Further, the global low-alcohol beverages market is set to reach $800 million in 2023.
Research from the Bacardi Consumer Survey 2022 shows around 38% of respondents in the U.S. plan to drink more cocktails than wine over the next year. Moreover, accelerating digital investments and expansion into newer categories is expected to bolster the industry’s long-term growth prospects.
Given this backdrop, fundamentally strong stocks The Coca-Cola Company (KO) and Ambev S.A. (ABEV) look well-positioned to capitalize on the industry tailwinds. Hence, it could be wise to scoop up the shares of these companies before you kick yourself later for not buying.
The Coca-Cola Company (KO)
KO is a beverage company that manufactures, markets, and sells various non-alcoholic beverages globally. It sells its products under brands: Coca-Cola, Sprite, Fanta, Diet Coke, Coca-Cola Zero Sugar, Thumbs Up, Aquarius, Minute Maid Pulpy, and Simply, among others.
On October 20, 2022, KO declared a quarterly dividend of 44 cents per common share, payable to the shareholders on December 15, 2022. KO’s four-year average dividend yield is 3.07%, and its forward annual dividend of $1.76 translates to a 2.75% yield. Its dividend has grown at a 3.2% CAGR over the past three years and a 3.5% CAGR over the past five years.
On June 13, 2022, the company announced a global relationship with Brown-Forman Corporation to debut the iconic Jack & Coke cocktail as a branded, ready-to-drink (RTD) pre-mixed cocktail option. This should be widely in demand, given its brand popularity.
KO’s net operating revenue increased 10.2% year-over-year to $11.06 billion in the third quarter that ended September 30, 2022. Its gross profit grew 7.1% from the year-ago value to $6.50 billion, while its net income attributable to shareowners increased 14.3% year-over-year to $2.83 billion. The company’s EPS increased 14% from its year-ago value to $0.65.
Analysts expect KO’s EPS and revenue to increase 7.4% and 10.5% year-over-year to $2.49 and $42.72 billion, respectively, in fiscal 2022, ending December 31. It surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 10.8% to close the last trading session at $63.99.
KO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Sentiment and a B for Stability and Quality. The stock is ranked #16 of 33 stocks in the A-rated Beverages industry. Click here to see the other ratings of KO for Growth, Value, and Momentum.
Ambev S.A. (ABEV)
Headquartered in Sao Paulo, Brazil, ABEV is engaged in the brewing sector. The company produces, distributes, and sells beer, carbonated soft drinks, and other non-alcoholic and non-carbonated beverages across the Americas. It markets products under Adriatica, Brahma, Leffe, Budweiser, Corona, PepsiCo, and Lipton.
The company’s four-year average dividend yield is 3.44%, and its current dividend translates to a 5.11% yield.
ABEV’s net revenue increased 11.3% year-over-year to R$20.59 billion ($3.88 billion) for the third quarter ended September 30, 2022. Its gross profit increased 7.6% year-over-year to R$9.94 billion ($1.87 billion). In addition, its normalized EBITDA increased 2.4% year-over-year to R$5.60 billion ($1.05 billion). Also, its normalized EPS came in at R$0.20.
The consensus EPS estimate of $0.05 for the fourth quarter ending December 31, 2022, represents a marginal improvement year-over-year. The revenue estimate for the ongoing quarter is expected to increase 5.4% year-over-year to $4.53 billion. ABEV has an excellent earnings surprise history; it surpassed the EPS estimates in each of the trailing four quarters.
The stock has gained 11.8% over the past six months to close the last trading session at $2.85.
ABEV’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Quality. Within the same industry, it is ranked #12 of 34 stocks. Click here to see the other ratings of ABEV for Growth, Value, Momentum, Stability, and Sentiment.
KO shares were trading at $64.23 per share on Wednesday morning, up $0.24 (+0.38%). Year-to-date, KO has gained 11.69%, versus a -14.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
2 Beverage Stocks You’ll Kick Yourself Later for Not Buying StockNews.com
