Despite historically high inflation, demand for beverages has remained stable, especially among the young generation. According to Statista, the number of users in the beverages segment is estimated to surpass 1 billion by 2025.
Danish beverage giant Carlsberg A/S (CABGY) CEO, Mr. Cees C. ´t Hart, said, “So far, we don’t any see any impact in our figures from rising inflation.” In addition, the Russia-Ukraine war has boosted U.S. sales of premium spirits. Moreover, global sales of fine wines, champagne, and spirits are expected to rise about 6% to $155.20 billion this year.
According to Research and Markets, the global functional beverage market is expected to grow at a CAGR of 10.5% until 2027.
Given the backdrop, it could be wise to add fundamentally sound beverage stocks PepsiCo, Inc. (PEP), Anheuser-Busch InBev S.A. ADR (BUD), and Primo Water Corporation (PRMW) to your portfolio now.
PepsiCo, Inc. (PEP)
PEP manufactures, markets, distributes and sells various beverages and convenient foods worldwide. It has seven segments- Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East, and South Asia; and Asia Pacific, Australia and New Zealand, and China Region.
On August 2, 2022, PEP entered into a strategic agreement with premium Romanian spring water AQUA Carpatica, under which PEP will own a 20% equity stake in AQUA Carpatica. This partnership will help PEP expand its product line and consumer base.
PEP’s net revenue came in at $20.23 billion for the second quarter ended June 11, 2022, up 5.2% year-over-year. Its gross profit increased 4.6% year-over-year to $10.81 billion. Also, its Frito-Lay North America segment’s revenue came in at $5.18 billion, up 13.8% year-over-year.
Analysts expect PEP’s revenue to increase 5.1% year-over-year to $83.52 billion in the current year. Its EPS is estimated to increase 6.8% year-over-year to $6.69 in 2022. It has surpassed EPS estimates in the four trailing quarters. Over the past year, the stock has gained 14.1% to close the last trading session at $180.32.
PEP has an overall B rating, equating to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Sentiment, Stability, and Quality. Within the A-rated Beverages industry, it is ranked #9 out of 35 stocks. Click here to see the additional POWR Ratings for Momentum, Growth, and Value for PEP.
Anheuser-Busch InBev S.A. ADR (BUD)
Headquartered in Leuven, Belgium, centuries-old BUD produces, distributes, and sells beer, alcoholic beverages, and soft drinks worldwide. It offers a portfolio of approximately 500 beer brands.
On July 28, 2022, Michel Doukeris, CEO, said, “The relentless execution of our strategy, the strength of our brands, and accelerated digital transformation enabled us to meet the moment in an ongoing dynamic operating environment.”
BUD’s revenue came in at $14.79 billion for the 2022 second quarter, up 9.3% year-over-year. Its gross profit increased 2.3% year-over-year to $8 billion, while its normalized EBITDA came in at $5.10 billion, up 5.2% year-over-year.
Street expects BUD’s revenue to increase 8% year-over-year to $58.64 billion in the current year. Its EPS is estimated to increase 11% per annum for the next five years. Over the past month, the stock has gained marginally to close the last trading session at $54.78.
BUD’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 has a B grade for Stability and Sentiment.
BUD is ranked #12 in the same industry. Click here to see the additional POWR Ratings for BUD (Growth, Momentum, Quality, and Value).
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.
On July 18, 2022, Primo Water North America, PRMW’s wholly-owned subsidiary, acquired Highland Mountain Water, located in Atlanta, Georgia. With this acquisition, the company aims to enhance its Mountain Valley® premium water brand and offer quality service to a larger consumer base.
PRMW’s net revenue came in at $571.40 million for the second quarter ended July 2, 2022, up 8.6% year-over-year. Its gross profit increased 11.8% year-over-year to $332.30 million. In addition, its net cash provided by operating activities increased 11.9% year-over-year to $66.70 million.
PRMW’s revenue is expected to increase 5.6% year-over-year to $2.19 billion in 2022. Its EPS is estimated to increase 20.8% per annum for the next five years. Over the past month, the stock has gained 10.6% to close the last trading session at $14.35.
PRMW has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Growth and B in Stability and Sentiment. It is ranked #6 in the same industry. We’ve also rated PRMW for Momentum, Quality, and Value. Get all the ratings here.
PEP shares were trading at $180.23 per share on Wednesday afternoon, down $0.09 (-0.05%). Year-to-date, PEP has gained 5.16%, versus a -9.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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