The beverage industry’s ability to meet evolving consumer preferences amid growing awareness regarding the importance of health and overall well-being should drive growth. Given the industry’s steady growth prospects, investors could consider quality beverage stocks Primo Water Corporation (PRMW), Kirin Holdings Company, Limited (KNBWY), and Coca-Cola Consolidated, Inc. (COKE) for the 2024 portfolio.
Due to increasing disposable income and shifting consumer preferences towards ready-to-drink beverages, particularly in developing and emerging economies, the market is anticipated to grow. The introduction of new non-alcoholic products, such as those with healthier content and based on fruits, due to increased health concerns about the sugar content of packaged beverages is expected to generate revenues for the market.
The global beverage market is expected to grow at a CAGR of 3.5% until 2028.
Moreover, the non-alcoholic beverages market is poised to expand considerably, with health-conscious consumers increasingly inclining toward healthy beverage options. Drizly reported that non-alcoholic beer, wine, and spirits are growing in popularity in the U.S., drawing on both consumer surveys and its data.
According to Statista, revenue in the non-alcoholic drinks market is expected to grow at a 4.7% CAGR between 2023 and 2027.
In addition, a growing trend toward veganism is driving demand for plant-based beverages. Organic foods and other non-GMO products have also influenced consumer buying behavior. This in turn again fostering market growth. According to Mintel, the functional beverage industry in the U.S. is the largest in the world.
The global functional beverage market is expected to grow at a CAGR of 8.6% until 2030.
With these favorable trends in mind, let's delve into the fundamentals of the three best Beverages stocks, 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, mineral water, sparkling and flavored water, filtration equipment, and coffee.
On November 2, PRMW entered a definitive agreement to sell a significant portion of Primo Water’s International businesses in an all-cash transaction valued at up to $575 million. Primo Water believes shareholders will benefit from an improved financial profile.
“The Transaction was the result of a proactive board-led process that resulted in an agreement that offers an attractive premium valuation for a significant portion of our international businesses and simplifies and focuses Primo Water on our core North American water business,” said Tom Harrington, Primo Water’s CEO.
“Looking ahead, we will be laser-focused on growing the North American business, increasing our profitability and margins, enhancing our balance sheet strength, and returning capital to shareowners,” Harrington added.
PRMW’s trailing-12-month gross profit margin of 60.85% is 80.4% higher than the 33.72% industry average. Its trailing-12-month EBITDA of 18.63% is 65.4% higher than the 11.26% industry average.
PRMW’s net revenue increased 6.4% year-over-year to $622 million for the third quarter ended September 30, 2023. Its adjusted EBITDA came in at $140.90 million, up 20.5% from the prior year’s quarter. The company’s adjusted net income was $52.20 million, or $0.33 per share, compared to $35.70 million, or $0.22 per share a year ago, respectively.
Analysts expect PRMW’s revenue to increase 8.6% year-over-year to $578.93 million for the fourth quarter ended December 2023. It has surpassed EPS estimates in all three trailing quarters, which is impressive.
Shares of PRMW has gained 19.1% over the past six months to close the last trading session at $14.80.
PRMW’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Stability, Quality and Value. It is ranked #8 out of 32 stocks in the B-rated Beverages industry.
Click here to see the other ratings of Growth, Momentum, and Sentiment.
Stock #2: Kirin Holdings Company, Limited (KNBWY)
Headquartered in Tokyo, Japan, KNBWY engages in the food and beverages, pharmaceuticals, and health science businesses. The company offers beer, wine, and spirits; dairy products; pharmaceutical products; and biochemical products. In addition, it operates factories and theme park businesses and manages a chain of Kirin City beer pubs.
On November 30, Kyowa Hakko Bio Co. Ltd, a subsidiary of KNBWY, received a no-question letter from the Food and Drug Administration (FDA) regarding its Generally Recognized as Safe Substances (GRAS) notices for three human milk oligosaccharides (HMOs). The company is committed to expanding the availability of these innovative ingredients in several countries.
On November 27, KNBWY launched a dual-care functional food supplement, Kirin iMUSE Immuno-Care and Healthya Visceral Fat Down. This product is a collaboration between Kirin iMUSE, Japan’s first immune care brand, and Kao Healthya, Japan’s first body fat care beverage brand from Kao Corporation.
KNBWY’s trailing-12-month gross profit margin of 45.28% is 34.3% higher than the 33.72% industry average. Its trailing-12-month CAPEX/Sales of 5.70% is 76.6% higher than the 3.23% industry average.
For the nine months that ended September 30, 2023, KNBWY’s revenue grew 6.2% year-over-year to ¥1.54 trillion ($10.67 billion). The company’s gross profit increased 5.5% from the year-ago value to ¥692.81 billion ($4.78 billion).
Its normalized operating profit came in at ¥141.54 billion ($976.19 million), up 4.7% from the previous year’s quarter. Furthermore, as of September 30, 2023, the company’s total assets were ¥2.94 trillion ($20.28 billion), compared to ¥2.54 trillion ($17.52 billion) as of December 31, 2022.
The consensus revenue is expected to be $3.93 billion for the fiscal fourth quarter (ended December 2023). The company surpassed the consensus revenue estimates in three of the trailing four quarters.
The stock has gained 1.6% over the past six months to close the last trading session at $14.48.
It’s no surprise that KNBWY has an overall rating of B, which equates to Buy in our proprietary rating system.
KNBWY has a B grade in Stability, Growth, Value, and Quality. Within the same industry, it is ranked #7.
In addition to the POWR Ratings we’ve stated above, we also have KNBWY’s ratings for Momentum and Sentiment. Get all KNBWY ratings here.
Stock #1: Coca-Cola Consolidated, Inc. (COKE)
COKE manufactures, markets, and distributes non-alcoholic beverages, primarily products of The Coca-Cola Company, in the U.S. The company provides sparkling beverages, still beverages such as energy products, and noncarbonated beverages, including bottled water, ready-to-drink coffee and tea, juices, and sports drinks.
COKE’s trailing-12-month gross profit margin of 38.77% is 15% higher than the industry average of 33.72%. Also, the stock’s trailing-12-month ROTC of 25.51% is 292.6% higher than the industry average of 6.50%.
During the third quarter that ended September 29, 2023, COKE’s net sales increased 5.1% year-over-year to $1.71 billion. Its adjusted gross profit was $661.99 million, up 6.7% from the prior year’s quarter. The company’s adjusted income from operating rose 11.4% from the year-ago value to $216 million.
In addition, the company’s adjusted net income was $164.34 million, an increase of 18.4% from the previous year’s period. Its adjusted net income per share grew 18.4% year-over-year to $17.53.
COKE’s shares have gained 70.5% over the past nine months to close the last trading session at $907.12.
COKE’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Stability. Within the same industry, it is ranked #6.
Beyond what is stated above, we’ve also rated for Growth, Value, Momentum, and Sentiment. Get all COKE ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
KNBWY shares were trading at $14.59 per share on Monday afternoon, up $0.11 (+0.73%). Year-to-date, KNBWY has declined -0.14%, versus a -0.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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