The beverage industry is set for strong growth with more people are becoming health-conscious, preferring non-alcoholic and zero-sugar options. Premium drinks, and functional beverages, alongside using technologies like generative AI to improve customer experiences are driving growth.
Considering these factors, investors could consider buying fundamentally strong beverage stocks: Suntory Beverage & Food Limited (STBFY), Kirin Holdings Company, Limited (KNBWY), and Coca-Cola FEMSA, S.A.B. de C.V. (KOF). Before diving deeper into their fundamentals, let’s discuss what is shaping the beverage industry’s prospects.
The beverage industry thrives thanks to trends like functional drinks for health, personalized options, plant-based alternatives, sustainability, and global flavors. These trends reflect innovation and adaptation, keeping brands successful. According to Modor Intelligence, the global beverages market is expected to hit $4.39 trillion by 2028, growing at a 4.3% CAGR.
As fitness trends rise, beverage brands are making energy drinks tailored for performance, adding fresh flavors and sugar-free alternatives to meet customer demands. On top of it, advanced tech and savvy marketing further propel industry sales.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Beverages picks, beginning with the third choice.
Stock #3: Suntory Beverage & Food Limited (STBFY)
Headquartered in Tokyo, Japan, STBFY engages in the manufacture and sale of alcoholic and non-alcoholic beverages, as well as foods, in Japan, the Asia-Pacific region, Europe, and the Americas. It offers mineral water, coffee drinks, tea drinks, carbonated drinks, sports drinks, health supplements, and food for specified health uses.
In terms of the trailing-12-month net income margin, STBFY’s 5.44% is 54.7% higher than the 4.72% industry average. Likewise, its 7.60% trailing-12-month Return on Total Capital is 13.1% higher than the 6.72% industry average. Additionally, its 5.40% trailing-12-month CAPEX / Sales is 62% higher than the 3.33% industry average.
In terms of forward EV/Sales, STFBY’s 1.07x is 34.7% lower than the 1.64x industry average. Its 7.63x forward EV/EBITDA is 27.4% lower than the 10.51x industry average. Likewise, its 11.55x forward EV/EBIT is 20.6% lower than the 14.55x industry average.
During the first quarter ended March 31, 2024, KNBWY’s revenues increased 10.2% year-over-year to ¥371.66 billion ($2.37 billion). Its operating income rose 12% over the prior-year quarter to ¥33.88 billion ($215.87 million).
For the same period, its profit attributable to owners of the company and earnings per share grew 38.9% and 38.8% from the year-ago value to ¥20.25 billion ($129.03 million) and ¥65.55, respectively.
For fiscal 2025 STBFY’s revenue and EPS is expected to increase 3.8% and 14.2% year-over-year to $11.10 billion and $1.14, respectively. It surpassed the revenue estimates in three of the trailing four quarters. Over the past six months, the stock has gained 16.1% to close the last trading session at $18.25. Its 60-month beta is 0.11.
STBFY’s positive outlook is reflected in its POWR Ratings. It 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.
It has a B grade for Value, Stability, and Quality. It is ranked #9 out of 33 stocks in the B-rated Beverages industry. To see STBFY’s Growth, Momentum, and Sentiment ratings, click here.
Stock #2: Kirin Holdings Company, Limited (KNBWY)
Headquartered in Tokyo, Japan, KNBWY engages in the food and beverage, pharmaceutical, and health science businesses. The company's products include beer, wine, whiskey, spirits, soft drinks, dairy products, and other items. It also produces and sells pharmaceutical and biochemical products.
In terms of the trailing-12-month gross profit margin, KNBWY’s 45.19% is 28.3% higher than the 35.23% industry average. Likewise, its 13.39% trailing-12-month EBITDA margin is 3.8% higher than the 12.91% industry average. Its 12.46% trailing-12-month Return on Common Equity is 12.6% higher than the 11.07% industry average.
In terms of forward Price/Sales, KNWBY’s 0.77x is 37.3% lower than the 1.22x industry average. Similarly, its 14.03x forward EV/EBIT is 3.6% lower than the 14.55x industry average. Also, its 1.17x forward EV/Sales is 28.4% lower than the 1.64x industry average.
KNBWY reported that revenues for the first quarter ended March 31, 2024, increased by 11.4% year-over-year to ¥501.76 billion ($3.19 billion). Its profit attributable to owners of the company and earnings per share grew by 363.3% and 363.5% from the previous year's value to ¥25.90 billion ($165.03 million) and ¥31.98, respectively. Moreover, its normalized operating profit amounted to ¥33.06 billion ($210.65 million).
Analysts expect KNBWY’s revenue for the quarter ending September 30, 2024, to increase marginally year-over-year to $3.86 billion. Its EPS for the fiscal 2024 is expected to grow 18.7% year-over-year to $1.10. Over the past three months, the stock has declined marginally to close the last trading session at $13.79. Its 60-month beta is 0.30.
KNBWY’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked #7 in the same industry. It has a B grade for Value, Stability, and Quality. To see KNBWY’s Growth, Momentum, and Sentiment ratings, click here.
Stock #1: Coca-Cola FEMSA, S.A.B. de C.V. (KOF)
Headquartered in Mexico City, Mexico, KOF is a franchise bottler that produces, markets, sells, and distributes Coca-Cola trademark beverages. The company offers sparkling beverages, including colas and flavored sparkling beverages, as well as water and other beverages, such as juice drinks, coffee, teas, milk, value-added dairy products, sports and energy drinks, alcoholic beverages, and plant-based drinks.
In terms of the trailing-12-month Capex/Sales, KOF’s 7.83% is 134.9% higher than the 3.33% industry average. Likewise, its 13.54% trailing-12-month EBIT margin is 44.7% higher than the 9.36% industry average. Furthermore, its 17.23% trailing-12-month EBITDA margin is 33.5% higher than the 12.91% industry average.
In terms of forward non-GAAP P/E, KOF’s 13.26x is 24.8% lower than the 17.64x industry average. Its 7.32x forward EV/EBITDA is 30.3% lower than the 10.51x industry average. In addition, its 2.66x forward Price/Book is 3.9% lower than the 2.77x industry average.
During the first quarter, which ended March 31, 2024, KOF’s total revenue rose 11.2% year-over-year to MXN63.80 billion ($3.75 billion). Similarly, its adjusted EBITDA increased 13.5% year-over-year to MXN11.94 billion ($701.58 million).
The company’s operating income and net income attributable to equity holders of the company grew 11.6% and 27.8% from the prior-year quarter to MXN8.62 billion ($506.50 million) and MXN5.01 billion ($294.38 million), respectively.
Street expects KOF’s EPS and revenue for the quarter ending June 30, 2024, to increase 11.9% and 6.5% year-over-year to $1.56 and $3.88 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, KOF’s stock has gained 12.3% to close the last trading session at $94.59. Its 24-month beta is 0.60.
KOF’s favorable outlook is reflected in its POWR Ratings. It has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has a B grade for Value, Stability, Sentiment, and Quality. It is ranked #2 in the Beverages industry. Beyond what we have stated above, we have also rated KOF for Growth, and Momentum. Get all the ratings of KOF here.
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KOF shares were trading at $94.26 per share on Friday afternoon, down $0.33 (-0.35%). Year-to-date, KOF has gained 0.43%, versus a 9.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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