Beverage stocks have traditionally been considered safe, reliable investments, but many of today’s leading companies are redefining the category with innovation and diversification. Brands are not only delivering refreshing drinks but are also expanding their product portfolios to include functional, organic, and premium offerings that cater to evolving consumer tastes.
Given this positive shift, you might consider keeping an eye on three fundamentally sound beverage stocks, The Coca-Cola Company (KO), Ambev S.A. (ABEV), and Coca-Cola Consolidated, Inc. (COKE), for potential gains.
Innovation plays a significant role in driving growth within the beverage sector. By leveraging research and development to create new flavors, healthier formulations, and eco-friendly packaging solutions, companies are aligning their focus on health-conscious consumers for additional market share.
Moreover, by experimenting with unconventional flavor profiles, brands are able to create distinctive products that stand out on crowded shelves, attracting curious and adventurous consumers eager to try something new.
Also, beverage companies are expanding their global reach through strategic acquisitions and enhanced distribution channels. Companies are tapping into emerging markets to diversify their regional portfolios, which enables them to maintain strong performance. Further, the global beverages market is set to reach $380.36 billion by 2029, exhibiting a CAGR of 8.3%.
With these positive market trends in mind, let’s look at the fundamentals of the three Beverages stocks, starting with the third pick.
Stock #3: The Coca-Cola Company (KO)
KO is a leading beverage company that manufactures, markets, and sells various non-alcoholic beverages worldwide. It offers sparkling soft drinks, water, sports, coffee, and tea; juice, value-added dairy, plant-based beverages, and syrups to retailers. KO's latest strategy involves altering recipes to reduce added sugar, promoting low and no-calorie beverage options, and increasing the availability of smaller packages to encourage portion control.
In terms of the trailing-12-month net income margin, KO’s 22.59% is 414.8% higher than the 4.39% industry average. Similarly, its 31.80% trailing-12-month levered FCF margin is 411.9% higher than the industry average of 6.21%. Also, its trailing-12-month ROCE of 41.86% compares to the industry average of 10.57%.
For the fourth quarter of 2024, which ended on December 31, KO's net operating revenues increased 6.4% year-over-year to $11.54 billion. Its gross profit rose 11.5% from the year-ago value to $6.93 billion. Its operating income stood at $2.71 billion, up 19.2% year-over-year, while its non-GAAP net income amounted to $2.38 billion, representing an increase of 11.8% from the last year. Also, the company’s non-GAAP EPS for the quarter increased 12.2% year-over-year to $0.55.
KO updated its full-year guidance for the year 2024, and the company expects organic revenue growth to be 5% to 6%. KO’s comparable EPS (non-GAAP) growth is expected to be 2% to 3%, compared to $2.88 in 2024. It anticipates generating a free cash flow of nearly $9.5 billion.
Analysts expect KO’s revenue and EPS for the first quarter (ending March 2025) to increase marginally year-over-year to $11.24 billion and $0.72, respectively. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Over the past year, the stock has surged 16.8%, closing the last trading session at $71.49.
KO’s stance is apparent in its POWR Ratings. The stock has a B grade for Stability, Sentiment, and Quality. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Among the 32 stocks in the A-rated Beverages industry, it is ranked #19. Click here to see the additional KO ratings (Growth, Value, and Momentum).
Stock #2: Ambev S.A. (ABEV)
Based in São Paulo, Brazil, ABEV is engaged in the production, distribution, and sale of beer, draft beer, carbonated soft drinks, other alcoholic beverages & non-alcoholic beverages, malt, and food products.
ABEV's trailing-12-month ROTC and ROTA of 12.49% and 9.47% are 71% and 134.2% higher than their respective industry averages of 7.31% and 4.04%. Likewise, its trailing-12-month EBITDA margin of 28.6% is 136.9% above the industry average of 12.08%.
ABEV’s net revenue for the fiscal fourth quarter ended December 31, 2024, increased 35.3% year-over-year, amounting to R$27.04 billion ($4.68 billion). The company reported a normalized operating profit of R$7.58 billion ($1.31 billion), indicating a 34.4% growth from the prior-year quarter. In addition, its normalized profit stood at R$5.02 billion ($868.51 million), and its normalized EBITDA came in at R$9.62 billion ($1.66 billion), reflecting increases of 7.5% and 34.5% year-over-year, respectively.
Street expects ABEV’s revenue for the fiscal second quarter (ending June 2025) to gain 6% year-over-year to $3.70 billion. Its EPS for the same period is expected to register an 18.7% growth from the prior year, settling at $0.03.
ABEV shares have surged 5.6% over the past month to close the last trading session at $1.89.
It’s no surprise that ABEV has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Quality and a B for Stability. Within the same A-rated industry, it is ranked #10 out of 32 stocks.
Click here to see the other ratings of ABEV for Growth, Value, Momentum, and Sentiment.
Stock #1: Coca-Cola Consolidated, Inc. (COKE)
COKE manufactures and distributes a wide range of nonalcoholic beverages that include sparkling drinks, energy drinks, water, coffee, tea, and juices. It serves diverse end-users, such as retailers, restaurants, schools, amusement parks, and recreational facilities, as well as through vending machine outlets.
The stock’s trailing-12-month ROTA of 11.92% is 194.8% higher than the industry average of 4.04%. Similarly, its 44.38% trailing-12-month ROCE is 320% above the industry average of 10.57%. Also, its trailing-12-month asset turnover ratio of 1.44x compares favorably to the industry average of 0.87x.
In the third quarter (ended December 31, 2024), COKE’s net sales increased 7.1% year-over-year to $1.75 billion. The company reported a gross profit of $697.87 million, indicating an 8.8% growth from the prior year’s quarter. Its income from operations grew 22.6% from the same period last year to $218.75 million. COKE’s adjusted net income came in at $156.67 million or $18.11 per share, up 24.8% and 35.3% year-over-year, respectively.
Shares of COKE gained 68% over the past year and 40.4% over the past nine months to close the last trading session at $1,393.24.
COKE’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has an A grade for Growth and a B for Stability and Quality. Within the same Beverages industry, it is ranked #6. Click here to see COKE’s ratings for Value, Momentum, and Sentiment.
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KO shares were trading at $70.87 per share on Wednesday afternoon, down $0.62 (-0.87%). Year-to-date, KO has gained 13.83%, versus a 1.32% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
