Growing health awareness and the increasing occurrence of lifestyle diseases have prompted consumers to opt for healthier beverages. Additionally, there is a rising demand for ready-to-drink beverages.
Against this backdrop, investors could consider buying fundamentally sound beverage stocks, Compañía Cervecerías Unidas S.A. (CCU), Suntory Beverage & Food Limited (STBFY), and Ambev S.A. (ABEV) to quench the portfolio’s thirst.
The global beverage industry is capitalizing on fundamental changes and evolving continuously, driven by the sector's increasing social and cultural significance.
The rising demand for refreshing drinks and societal advancements offer investors a broad perspective on the industry. Therefore, the beverages industry is poised to grow at a CAGR of 12.7% by 2031.
Moreover, the rising urbanization rate coupled with the busy lifestyles of consumers has created a demand for convenient and easily accessible food and drinks. Ready-to-drink (RTD) beverages effectively meet this demand by providing fast and convenient refreshment solutions for busy urban dwellers.
Considering these encouraging trends, let’s take a look at the fundamentals of the three best Beverages industry stocks, beginning with the third choice.
Stock #3: Compañía Cervecerías Unidas S.A. (CCU)
Based in Santiago, Chile, CCU operates as a multi-category beverage company in Chile, Argentina, Bolivia, Colombia, Paraguay, and Uruguay. It operates through three segments: Chile; International Business; and Wine.
CCU’s trailing-12-month gross profit margin and EBITDA margin of 45.90% and 13.18% are 30.5% and 4.6% higher than the industry averages of 35.17% and 12.60%, respectively. Similarly, the stock’s trailing-12-month CAPEX/Sales of 5.69% is 75.2% higher than the industry average of 3.25%.
For the first quarter that ended May 4, 2024, CCU’s net sales increased 1.9% year-over-year to CLP746.02 billion ($791.11 million). Its gross profit was reported at CLP352.13 billion ($362.81 million). The company’s net income for the period came in at CLP55.03 billion ($58.36 million).
Street expects CCU’s revenue and EPS for the year (ending December 2024) to increase 17.2% and 38.4% year-over-year to $3.08 billion and $0.81, respectively. Furthermore, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
CCU’s stock has soared 7% over the past nine months to close the last trading session at $11.82.
CCU’s POWR Ratings reflect this robust 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 Quality and Value. It is ranked #6 in the 33-stock B-rated Beverages industry.
Beyond what is stated above, we’ve also rated CCU for Growth, Momentum, Stability, and Sentiment. Get all CCU ratings here.
Stock #2: Suntory Beverage & Food Limited (STBFY)
Headquartered in Tokyo, Japan, STBFY engages in the manufacture and sale of alcoholic and non-alcoholic beverages and foods in Japan, Asia-Pacific, Europe, and the Americas. It offers mineral water, coffee drinks, tea drinks, carbonated drinks, sports drinks, health supplements, and food for specified health uses.
STBFY’s trailing-12-month gross profit margin of 37.20% is 5.8% higher than the industry average of 35.17%. Likewise, its trailing-12-month net income margin and Return on Total Capital of 5.44% and 7.60% are 14.8% and 8.8% higher than the industry averages of 4.74% and 6.99%, respectively.
STBFY’s revenue for the fiscal first quarter that ended March 31, 2024, increased 10.2% year-over-year to ¥371.66 billion ($394.12 million). Its gross profit grew 12% year-over-year to ¥124.25 billion ($131.76 million). The company’s profit for the period grew 33.3% and 38.8% year-over-year to ¥25.88 billion ($27.44 million) and ¥65.55 per share.
Street expects STBFY’s revenue for the year (ending December 2024) to increase 272.8% year-over-year to $10.81 billion. Furthermore, the company surpassed the consensus revenue estimates in three of the trailing four quarters.
Over the past nine months, the stock has gained 20.9%, closing the last trading session at $17.57.
STBFY’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.
STBFY has a B grade for Value, Stability, Sentiment, and Quality. The stock is ranked #4 in the same industry.
Click here to access the additional STBFY ratings (Growth and Momentum).
Stock #1: Ambev S.A. (ABEV)
Headquartered in São Paulo, Brazil, ABEV produces, distributes, and sells beer, draft beer, carbonated soft drinks, malt and food, other alcoholic beverages, and non-alcoholic and non-carbonated products in Brazil, Central America and the Caribbean, Latin America South, and Canada.
ABEV’s trailing-12-month gross profit margin of 50.66% is 44% higher than the industry average of 35.17%. Its trailing-12-month ROCE of 16.90% is 48% higher than the 11.42% industry average. Also, the stock’s trailing-12-month net income margin of 18.25% is 285.2% higher than the 4.74% industry average.
For the fiscal first quarter that ended March 31, 2024, ABEV’s net revenue stood at R$20.28 billion ($3.74 billion). The company’s gross profit amounted to R$10.22 billion ($1.89 billion). Its normalized operating profit came to R$4.90 billion ($904.32 million). For the same period, its normalized profit came in at R$3.82 billion ($705 million) and R$0.23 per share.
Street expects ABEV’s revenue for the quarter ending December 2024 to increase 8.7% year-over-year to $4.37 billion. For fiscal 2025, its revenue and EPS are expected to increase 6.3% and 9.8% year-over-year to $16.56 billion and $0.19, respectively.
Shares of ABEV have gained 2.4% over the past month to close the last trading session at $2.13.
ABEV’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
ABEV has a B grade for Stability and Quality. It is ranked #3 in the same industry.
In addition to the POWR Ratings highlighted above, one can access ABEV’s ratings for Growth, Momentum, Value, and Sentiment 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.
ABEV shares were trading at $2.12 per share on Tuesday afternoon, down $0.01 (-0.47%). Year-to-date, ABEV has declined -24.29%, versus a 17.46% 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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