Consumer preferences have shifted towards health-focused, low/no-alcohol, and zero-sugar beverages, along with functional drinks and premiumization. This trend has spurred innovation and growth in the beverage industry by encouraging brands to develop healthier, personalized, and high-quality products, aligning with modern health and lifestyle demands.
Considering these factors, investors could consider buying fundamentally strong beverage stocks such as Primo Water Corporation (PRMW), Coca-Cola Consolidated, Inc. (COKE), and Ambev S.A. (ABEV) for steady returns.
The beverage industry benefits from new flavors, eco-friendly practices, advanced technology, and health-focused options, which improve customer experiences, boost loyalty, and create investment opportunities. In addition, the popularity of bottled water and innovative products drives further sector growth. The global beverages market is projected to reach $4.39 trillion by 2028, growing at a 4.3% CAGR.
This summer, consumer preferences for tequila, low-alcohol, and flat spiked drinks, along with varied flavors, healthier options, and creative packaging, have driven growth in the beer and beverage industry, leading to expansion and innovation. Furthermore, Statista predicts the beverage market will reach $248.70 billion in 2024.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Beverages picks, beginning with the third choice.
Stock #3: Primo Water Corporation (PRMW)
PRMW provides pure-play water solutions for residential and commercial customers. It offers bottled water, water dispensers, purified bottled water, self-service refill drinking water, premium spring and mineral water, sparkling and flavored essence water, filtration units, and coffee.
In terms of the trailing-12-month EBITDA margin, PRMW’s 20.59% is 64.4% higher than the 12.52% industry average. Similarly, its trailing-12-month net income margin and levered FCF margin of 14.21% and 9.36% are 199.2% and 68.6% higher than the industry averages of 4.75% and 5.55%, respectively.
In the first quarter ended March 30, 2024, PRMW’s net revenue stood at $452 million, up 9.6% year-over-year. Its adjusted EBITDA grew 24.2% over the prior-year quarter to $93.90 million. In addition, its adjusted net income and EPS increased 172.3% and 171.4% from the year-ago quarter to $30.50 million and $0.19, respectively.
For the quarter ended June 30, 2024, PRMW’s EPS is expected to increase marginally year-over-year to $0.24. Its revenue for the quarter ending December 31, 2024, is expected to increase 5% year-over-year to $460.77 million. Over the past year, the stock has gained 64.8% to close the last trading session at $21.18.
PRMW’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth and Quality. It is ranked #11 out of 33 stocks in the B-rated Beverages industry. To see PRMW’s Value, Momentum, Stability, and Sentiment ratings, click here.
Stock #2: Coca-Cola Consolidated, Inc. (COKE)
COKE and its subsidiaries manufacture, market, and distribute non-alcoholic beverages, primarily products of The Coca-Cola Company, in the United States. The company offers sparkling beverages and still beverages, including energy products, as well as noncarbonated beverages comprising bottled water, ready-to-drink coffee and tea, enhanced water, juices, and sports drinks.
In terms of the trailing-12-month gross profit margin, COKE’s 39.20% is 11.4% higher than the 35.18% industry average. Likewise, its 15.24% trailing-12-month EBITDA margin is 21.7% higher than the 12.52% industry average. Its 32.16% trailing-12-month Return on Common Equity is 188.8% higher than the 11.14% industry average.
During the first quarter which ended March 29, 2024, COKE reported non-GAAP net operating revenues of $11.23 billion, a 2.5% year-over-year increase. The company’s non-GAAP operating income grew 4.4% from the year-ago value to $3.64 billion.
In addition, the company’s non-GAAP net income was $3.12 million, an increase of 6.1% from the previous year’s period. Its non-GAAP net income per share grew 5.9% year-over-year to $0.72.
Over the past year, COKE’s stock has gained 77.8% to close the last trading session at $1,080.52.
COKE’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked #7 in the same industry. It has a B grade for Quality. To see COKE’s Growth, Value, Momentum, Stability, and Sentiment ratings, click here.
Stock #1: Ambev S.A. (ABEV)
Headquartered in São Paulo, Brazil, ABEV produces, distributes, and sells beer, draft beer, carbonated soft drinks, other non-alcoholic beverages, malt, and food products.
In terms of the trailing-12-month Capex / Sales, ABEV’s 7.38% is 124.9% higher than the 3.28% industry average. Likewise, its 23.69% trailing-12-month EBIT margin is 163.4% higher than the 9% industry average. Furthermore, its 29.24% trailing-12-month EBITDA margin is 133.5% higher than the 12.52% industry average.
ABEV’s net revenue for the fiscal first quarter that ended March 31, 2024, stood at R$20.28 billion ($3.74 billion). The company’s gross profit amounted to R$10.22 billion ($1.88 billion). Its normalized operating profit came to R$4.90 billion ($903.13 million). For the same period, its normalized profit came in at R$3.82 billion ($704.08 million) and R$0.23 per share.
Street expects ABEV’s EPS for the quarter ending December 31, 2024, to increase 2.2% year-over-year to $0.06. Its revenue for the same quarter is expected to rise 8.5% year-over-year to $4.36 billion. Over the past month, ABEV’s stock has gained marginally to close the last trading session at $2.14.
ABEV’s favorable outlook is reflected in its POWR Ratings. It has an overall rating of B, translating to a Buy in our proprietary rating system.
It has a B grade for Stability and Quality. It is ranked #4 in the Beverages industry. Beyond what we have stated above, we have also rated ABEV for Growth, Value, Momentum, and Sentiment. Get all the ratings of ABEV here.
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ABEV shares were trading at $2.16 per share on Friday afternoon, up $0.02 (+0.93%). Year-to-date, ABEV has declined -22.86%, versus a 19.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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