Despite macroeconomic concerns, beverage demand is expected to remain steady. So, quality beverage stocks Ambev S.A. (ABEV), Kirin Holdings Company, Limited (KNBWY), and Primo Water Corporation (PRMW) could be wise additions to your portfolio now.
According to Statista, beverage revenue is expected to show an annual growth rate of 15%, resulting in a market volume of $112.60 billion by 2027. Revenue this year is projected to reach $64.38 billion.
Also, a shift toward non-alcoholic beverages has been noticed as customers become more concerned about their physical and emotional health. According to Pattern Data Science, 52% of consumers are replacing alcohol with non-alcoholic beverages.
With consumer tastes and trends continually evolving, beverage manufacturers are developing new products to cater to fresh customers and preferences.
In addition, the functional beverages market is expected to grow at a 7.5% CAGR to $402.60 billion by 2031. Rising health awareness, investments by food and beverage firms, scientific research, low convenience food consumption, sports and performance drink demand, and changing lifestyle patterns are driving the functional beverage industry.
Take a detailed look at the stocks mentioned above:
Ambev S.A. (ABEV)
ABEV, headquartered in São Paulo, Brazil, manufactures, distributes, and sells beer, draught beer, carbonated soft drinks, other non-alcoholic beverages, malt, and food products. It distributes its goods directly and through a network of independent distributors.
ABEV’s forward EV/EBIT of 11.89x is 24.4% lower than the industry average of 15.72x. Its forward EV/EBITDA of 8.95x is 26.6% lower than the industry average of 12.20x.
ABEV’s trailing-12-month net income margin of 18.03% is 471% higher than the industry average of 3.16%. Its trailing-12-month levered FCF margin of 11.06% is 262.7% higher than the industry average of 3.05%.
During the fourth quarter that ended March 31, 2022, ABEV’s net revenue increased 11.3% year-over-year to R$20.53 billion ($4.35 billion). Its gross profit grew 15.2% from the year-ago value to R$10.40 billion ($2.20 billion), and its normalized EBITDA rose 16.7% from the prior year’s period to R$6.44 billion ($1.36 billion).
Furthermore, the company’s profit grew 8.1% year-over-year to R$3.84 billion ($81 million), while its EPS came in at R$0.24, representing an increase of 8.3% year-over-year.
The consensus revenue estimate of $19.47 billion for the year ending December 2024 represents a 6.4% increase year-over-year. Its EPS is expected to grow 15.5% year-over-year to $0.21 for the same period. It surpassed EPS estimates in all four trailing quarters. ABEV’s shares have gained 17.3% over the past six months to close the last trading session at $3.12.
ABEV’s POWR Ratings reflect this promising outlook. The stock 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.
ABEV also has a B grade for Stability, Sentiment, and Quality. It is ranked #8 out of 37 stocks in the A-rated Beverages industry. Click here for the additional POWR Ratings for Growth, Momentum and Value for ABEV.
Kirin Holdings Company, Limited (KNBWY)
Headquartered in Tokyo, Japan, KNBWY engages in food and beverages, pharmaceuticals, and health science businesses.
KNBWY’s forward EV/Sales multiple of 1.13 is 33.7% lower than the industry average of 1.71. Its forward Price/Sales multiple of 0.81 is 28.5% lower than the industry average of 1.13.
KNBWY’s trailing-12-month net income margin of 4.90% is 55.3% higher than the industry average of 3.16%. Its trailing-12-month levered FCF margin of 4.39% is 47.3% higher than the industry average of 2.98%.
KNBWY’s revenue for the first quarter ended March 31, 2023, increased 8.1% year-over-year to ¥450.33 million ($3.12 billion). Its normalized operating profit increased 29.5% from the year-ago value to ¥33.57 billion ($232.66 million).
Also, its total current liabilities came in at ¥557.14 billion ($3.86 billion) for the period that ended March 31, 2023, compared to ¥632.70 billion ($4.38 billion) for the period that ended December 31, 2022. Its total liabilities came in at ¥1.24 trillion ($8.58 billion), compared to ¥1.29 trillion ($8.93 billion) for the same period.
Analysts expect KNBWY’s revenue to increase significantly year-over-year to $14.83 billion for the year ending December 2023. Over the past month, the stock has gained 3.6% to close the last trading session at $15.08.
KNBWY’s POWR Ratings reflect strong prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. It has a B grade for Stability, Value, and Quality. It is ranked #6 in the same industry.
Beyond what is stated above, we’ve also rated KNBWY for Sentiment, Momentum, and Growth. Get all KNBWY ratings here.
Primo Water Corporation (PRMW)
PRMW provides water directly to consumers and water filtration services in North America and Europe. It serves bottled water, purified bottled water, premium spring, sparkling and flavored water, mineral water, filtration equipment, coffee, water dispensers, and self-service refill drinking water.
PRMW’s forward Price/Cash Flow of 6.70x is 51.3% lower than the industry average of 13.76x. Its forward Price/Book of 1.76x is 39% lower than the industry average of 2.89x.
PRMW’s trailing-12-month EBITDA margin of 17.41% is 72.7% higher than the 10.08% industry average, while its trailing-12-month gross profit margin of 59.14% is 88.6% higher than the industry average of 31.36%.
For the first quarter that ended on April 1, 2023, PRMW’s net revenue increased 4% from the year-ago value to $546.50 million. Its adjusted EBITDA increased 8% year-over-year to $94.90 million. The company’s adjusted net income grew marginally from the year-ago value to $14.9 million, while its non-GAAP EPS stood at $0.09.
Street expects PRMW’s revenue to increase 5.3% year-over-year to $2.33 billion for the year ending December 2023. Its EPS is expected to come in at $0.74 for the same period. The stock has gained 13% over the past month to close the last trading session at $14.17.
It’s no surprise that PRMW has an overall B rating, equating to a Buy in our POWR Ratings system. It is ranked #7 in the same industry. It has a B grade for Growth, Sentiment and Quality. To see additional PRMW’s ratings for Value, Stability, and Momentum, click here.
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ABEV shares were trading at $3.09 per share on Tuesday morning, down $0.03 (-0.96%). Year-to-date, ABEV has gained 13.60%, versus a 20.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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