Despite ongoing macroeconomic challenges, beverage demand remains stable. The industry is likely to grow steadily in the coming years. So, quality beverage stocks Kirin Holdings Company, Limited (KNBWY), Embotelladora Andina S.A. (AKO.B), 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 15.8%, resulting in a market volume of $124.60 billion by 2027. Revenue this year is projected to reach $69.30 billion.
The beverage market is expanding rapidly as a result of industrial expansion, increased demand, technical advancements, and consumer awareness.
Soft Drinks is the largest segment of the non-alcoholic beverage market, with a market volume of $328.10 billion in 2023. In global comparison, the United States generates the most revenue.
In addition, spending on away-from-home food and beverages has been rising. According to the US Department of Agriculture estimates, eating out accounted for 53.2% of US household food spending in 2022, up from 48.3% in 2020.
Take a detailed look at the stocks mentioned above:
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 1.16 is 29.6% lower than the industry average of 1.65. Its forward Price/Sales multiple of 0.83 is 22.6% lower than the industry average of 1.07.
KNBWY’s trailing-12-month net income margin of 4.90% is 55.4% higher than the industry average of 3.16%. Its trailing-12-month levered FCF margin of 47.3% is 109.4% 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.
The consensus revenue estimate of $14.29 billion for the year ending December 2023 represents a significant increase year-over-year. KNBWY’s shares have gained marginally intraday to close the last trading session at $14.64.
KNBWY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
KNBWY has a B for Value, Stability, and Quality. Within the A-rated Beverages industry, it is ranked #6 out of 36 stocks. Click here for the additional POWR Ratings for Growth, Momentum, and Sentiment for KNBWY.
Embotelladora Andina S.A. (AKO.B)
AKO.B, headquartered in Santiago, Chile, produces, markets, and distributes Coca-Cola Company (KO) trademark beverages in Chile, Brazil, Argentina, and Paraguay. The company offers fruit juices, sports drinks, mineral and purified water, and PET bottles.
AKO.B’s forward EV/EBITDA of 5.41x is 54.9% lower than the industry average of 11.98x. Its forward EV/EBIT of 7.36x is 53% lower than the industry average of 15.64x.
AKO.B’s trailing-12-month EBITDA margin of 16.50% is 66.3% higher than the 9.92% industry average, while its trailing-12-month gross profit margin of 38.71% is 23.4% higher than the industry average of 31.36%.
AKO.B’s net sales increased 12.4% year-over-year to CLP701.86 billion ($877.32 million) in the first quarter ended March 31, 2023. Its operating income grew 3.1% from the year-ago value to CLP98.34 billion ($122.92 million), while its adjusted EBITDA improved 5% year-over-year to CLP127.44 billion ($159.30 million).
Street expects AKO.B’s revenue to increase 4.4% year-over-year to $3.43 billion for the year ending December 2023. Its EPS is expected to grow 47.6% year-over-year to $1.45 for the same period. Over the past year, the stock has gained 49.3% to close the last trading session at $15.68.
It’s no surprise that AKO.B has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Value and a B grade for Stability and Quality. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated AKO.B for Growth, Sentiment, and Momentum. Get all AKO.B 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 5.90x is 56.3% lower than the industry average of 13.49x. Its forward Price/Sales of 0.85x is 20.1% lower than the industry average of 1.07x.
PRMW’s trailing-12-month EBITDA margin of 17.41% is 75.4% higher than the 9.92% 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.
Analysts expect 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. PRMW’s shares have lost marginally intraday to close the last trading session at $12.47.
PRMW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #7 in the same industry. It has a B grade for Growth and Quality. To see additional PRMW’s ratings for Value, Stability, Sentiment, and Momentum, click here.
What To Do Next?
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KNBWY shares were unchanged in premarket trading Wednesday. Year-to-date, KNBWY has declined -3.81%, versus a 16.92% 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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