With the demand for beverages typically inelastic, the sector is relatively resistant to economic downturns. Therefore, amid fears of an impending recession, it could be worth buying fundamentally strong beverage stocks Coca-Cola Europacific Partners PLC (CCEP), Carlsberg A/S (CABGY), and Coca-Cola HBC AG (CCHGY) with solid momentum.
While the beverage industry consists of established brands, it is challenging for new competitors to enter the market. This helps existing companies maintain their profits. Moreover, an increase in promotional and advertisement strategies by various beverage manufacturers is expected to drive the market’s growth.
With consumer tastes and trends constantly changing, beverage manufacturers are creating innovative products to cater to newer customers and preferences.
Additionally, technological developments and the rise of e-commerce are expected to significantly boost the beverages sector as grocery e-commerce popularity is growing. According to Statista, beverages segment revenue is expected to reach $124.60 billion by 2027, growing at a CAGR of 15.8%.
Considering these factors, investors could look to buy the featured beverage stocks. Let’s take a closer look at their fundamentals.
Coca-Cola Europacific Partners PLC (CCEP)
Based in Uxbridge, the United Kingdom, CCEP produces, distributes, and sells a range of non-alcoholic ready-to-drink beverages. It offers flavors, mixers, and energy drinks; soft drinks, waters, enhanced water, and isotonic drinks; and ready-to-drink tea and coffee, juices, and other drinks.
In terms of the trailing-12-month EBIT margin, CCEP’s 12.39% is 85.9% higher than the industry average of 6.67%. Its 13.26% trailing-12-month levered FCF margin is 344.8% higher than the industry average of 2.98%. Likewise, its 8.71% trailing-12-month net income margin is 175.9% higher than the 3.16% industry average.
For the fiscal first quarter that ended March 31, 2023, CCEP’s revenue increased 12.0% year-over-year to €4.15 billion ($4.52 billion). The company’s revenue per unit case increased 9.8% year-over-year to €5.50.
Over the past nine months, the stock has gained 41.8% to close the last trading session at $65.45.
CCEP’s strong fundamentals are reflected in its POWR Ratings. 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.
Within the A-rated Beverages industry, it is ranked #13 out of 36 stocks. It has a B grade for Stability. To see the additional ratings of CCEP for Growth, Value, Momentum, Sentiment, and Quality, click here.
Carlsberg A/S (CABGY)
CABGY is headquartered in Copenhagen, Denmark. It produces and sells beer and other beverage products in Denmark. It offers core, and craft, and specialty beers; and alcohol-free brews. It also exports its products to approximately 100 countries worldwide.
In terms of the trailing-12-month EBIT margin, CABGY’s 14.81% is 122.1% higher than the industry average of 6.67%. Its 18.61% trailing-12-month EBITDA margin is 87.6% higher than the industry average of 9.92%. Likewise, its 18.12% trailing-12-month Return on Common Equity is 78.2% higher than the 10.17% industry average.
For the fiscal first quarter that ended March 31, 2023, CABGY’s revenue increased 9.8% from the prior-year quarter to DKK16.41 billion ($2.40 billion).
Analysts expect CABGY’s revenue for the quarter ended June 30, 2023, to increase 11.4% year-over-year to $3.13 billion. Over the past nine months, the stock has gained 27.5% to close the last trading session at $31.10.
CABGY’s POWR Ratings reflect this promising outlook. CABGY has an overall rating of B, which translates to a Buy. It is ranked #11 in the same industry. It has a B grade for Stability and Quality. Click here to access the additional ratings of CABGY for Growth, Value, Momentum, and Sentiment.
Coca-Cola HBC AG (CCHGY)
Headquartered in Steinhausen, Switzerland, CCHGY engages in the production, distribution, and sale of non-alcoholic ready-to-drink beverages under franchise worldwide. The company offers sparkling soft drinks, adult sparkling, hydration drinks, juices, ready-to-drink tea, energy drinks, dairy, coffee, water, plant-based drinks, premium spirits and flavored alcoholic beverages, and snacks.
In terms of the trailing-12-month EBIT margin, CCHGY’s 9.59% is 43.9% higher than the industry average of 6.67%. Its 5.55% trailing-12-month Levered FCF margin is 86.2% higher than the industry average of 2.98%. Likewise, its 5.69% trailing-12-month CAPEX/Sales is 80.2% higher than the 3.16% industry average.
CCHGY’s net sales revenue for the first quarter ended March 31, 2023, increased 24.4% year-over-year to €2.20 billion ($2.39 billion). Its net sales revenue per unit case came in at €3.55, representing a 21.3% increase from the prior-year quarter.
The company’s established markets net sales revenue increased 21.2% year-over-year to €696.60 million ($757.43 million). Its developing markets and emerging markets net sales revenue increased 24.2% and 26.6% year-over-year to €412.20 million ($448.20 million) and €1.09 billion ($1.19 billion), respectively.
CCHGY’s revenue for the quarter ended June 30, 2023, is expected to increase 16.3% year-over-year to $2.93 billion. Over the past nine months, the stock has gained 35.2% to close the last trading session at $29.41.
CCHGY’s strong prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. CCHGY is ranked #16 in the Beverages industry. It has a B grade for Stability. We have also given CCHGY grades for Growth, Value, Momentum, Sentiment, and Quality. Get all CCHGY ratings here.
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CCEP shares fell $0.78 (-1.19%) in premarket trading Thursday. Year-to-date, CCEP has gained 16.92%, versus a 15.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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