The beverage industry is fuelled by robust demand and the adoption of changing consumer preferences. Against this backdrop, quality beverage stocks The Coca-Cola Company (KO) and National Beverage Corp. (FIZZ) might be a solid buy. However, Celsius Holdings, Inc. (CELH) might be best kept on hold.
The beverage market is primarily driven by the rising product demand among the geriatric population. In addition, the evolving consumer preferences and the growing awareness regarding the importance of nutrition and overall well-being are augmenting the market growth.
IMARC Group expects the global functional beverages market to reach $205.10 billion by 2028, exhibiting a CAGR of 6.8% until 2028.
Additionally, the plant-based beverages market is driven by factors such as the increased demand for vegan food options amidst the growing health concerns about the consumption of animal-based diets. As a result, the plant-based beverages market is projected to reach $19.67 billion by 2023, growing at a CAGR of 12%.
Moreover, the global soft drinks market is projected to reach $1.5 trillion by 2030, growing at a CAGR of 7.3%. Also, the carbonated soft drinks segment is expected to record a 6.7% CAGR and reach $608 billion during the same period.
Let’s discuss the stocks mentioned above in detail:
Stocks to Buy:
The Coca-Cola Company (KO)
KO is a beverage giant that operates through segments, including Europe, the Middle East, and Africa; Latin America; North America; Asia Pacific; Global Ventures; and Bottling Investments. It owns and markets five non-alcoholic sparkling soft drink brands, and its products are sold in more than 200 countries.
On July 12, 2023, KO and eight bottling partners from around the world announced the closing of a new, $137.7 million venture capital fund focusing on sustainability investments.
On July 19, KO declared a quarterly dividend of $0.46, payable on October 2, 2023.
KO pays a $1.84 per share dividend annually, translating to a 3.16% yield on the current share price. Its four-year average dividend yield is 3.02%.
KO’s trailing-12-month ROTA of 10.67% is 148.5% higher than the industry average of 4.30%. Its trailing-12-month gross profit margin of 58.52% is 78.2% higher than the industry average of 32.83%.
For the fiscal second quarter that ended June 30, 2023, KO’s net operating revenues increased 5.7% year-over-year to $11.97 billion, and its non-GAAP gross profit rose 6.6% from the year-ago quarter to $7.11 billion. The company’s non-GAAP operating income rose 9.1% year-over-year to $3.78 billion.
Furthermore, KO’s non-GAAP net income and net income per share increased 10.5% and 11.4% from the prior-year quarter to $3.39 billion and $0.78, respectively.
For the fiscal year ending December 2023, KO’s revenue and EPS are expected to increase 4.6% and 6.4% year-over-year to $45.02 billion and $2.64, respectively. Also, it has surpassed its EPS and revenue estimates in each of the trailing four quarters, which is impressive.
KO’s shares have gained marginally intra-day to close the last trading session at $58.71.
KO’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.
It has an A grade for Quality and a B in Sentiment and Stability. Within the B-rated Beverages industry, it is ranked #13 out of 35 stocks.
Beyond what is stated above, we’ve also rated KO for Momentum, Growth, and Value. Get all KO ratings here.
National Beverage Corp. (FIZZ)
FIZZ develops, produces, markets, and sells a portfolio of sparkling waters, juices, energy drinks, and carbonated soft drinks, primarily in the United States and Canada.
FIZZ’s trailing-12-month ROTA of 24.41% is 468.2% higher than the industry average of 4.30%. Its trailing-12-month asset turnover ratio of 2.15x is 136.6% higher than the industry average of 0.91x.
For the fiscal first quarter ended July 29, 2023, FIZZ’s net sales increased 1.9% year-over-year to $324.24 million, while its net income rose 40% from the prior-year quarter to $49.63 million. Earnings per common share increased 39.5% year-over-year to $0.53.
Street expects FIZZ’s revenue to increase 6% year-over-year in the current quarter (ending October 2023) to $305.63 million. Its EPS is expected to increase 21.2% year-over-year to $0.47 for the same quarter. Also, it has surpassed its EPS estimates in each of the trailing four quarters.
FIZZ’s shares have gained 12.4% over the past year, closing the last trading session at $46.45.
It’s no surprise that FIZZ has an overall rating of B, which equates to Buy in our proprietary rating system.
FIZZ also has an A grade for Quality and a B in Stability. It is ranked #14 in the same industry.
In addition to the POWR Ratings highlighted above, one can access FIZZ’s ratings for Momentum, Growth, Value, and Sentiment here.
Stock to Hold:
Celsius Holdings, Inc. (CELH)
CELH develops, processes, markets, distributes, and sells functional drinks and liquid supplements in the United States and internationally.
CELH’s trailing-12-month gross profit margin of 45.22% is 37.7% higher than the 32.83% industry average. However, its 1.33% trailing-12-month CAPEX/Sales is 58% lower than the 3.16% industry average.
CELH’s revenues rose 111.6% year-over-year to $325.88 million in the second quarter ended June 30, 2023. Gross profit increased 168% from the same quarter last year to $158.99 million and income from operations improved 421.4% from the year-ago quarter to $64.181 million. However, its selling, general and administrative expenses increased 100.9% year-over-year to $94.18 million.
Analysts expect CELH’s EPS for the third quarter ending September 30, 2023, to be $0.47. Its revenue for the same quarter is expected to increase 84.4% year-over-year to $347.06 million. It surpassed the revenue estimates in three of the trailing four quarters.
Over the past nine months, the stock has gained 70.7% but declined 8.3% intra-day to close the last trading session at $181.41.
CELH’s mixed fundamentals are apparent in its POWR Ratings. The stock has an overall C rating, equating to a Neutral in our proprietary rating system.
It has a C grade for Momentum, Sentiment, and Quality. It is ranked #31 in the same industry.
To access additional ratings for CELH’s Growth, Stability, and Value, click here.
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KO shares were trading at $57.95 per share on Thursday morning, down $0.49 (-0.84%). Year-to-date, KO has declined -6.77%, versus a 14.66% 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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