The U.S. food and beverage industry is not just stable, it's also experiencing significant growth, driven by health trends and demand for convenience, particularly for organic options and technological advancements. As consumer preferences shift, this is an ideal time to consider quality food and beverage stocks: PepsiCo, Inc. (PEP), Coca-Cola Consolidated, Inc. (COKE), and WH Group Limited (WHGLY), which offer steady growth and the potential for significant expansion.
The U.S. food and beverage industry is evolving due to health and wellness concerns, driving demand for organic, plant-based, and functional foods with clean labels, low sugar, and added nutrients. Technological advancements, including plant-based proteins and e-commerce, are transforming product development and distribution. Additionally, rising disposable income and shifting consumer preferences, particularly among younger demographics, are increasing interest in convenient options like ready-to-eat meals and meal kits.
Recently, sectors like ready-to-drink beverages, plant-based alternatives, and functional drinks have been experiencing significant growth, fueling innovation and competition. The food and beverages market is projected to grow to $8.82 trillion by 2028, with a CAGR of 5.9%.
Furthermore, the meal ordering process is becoming increasingly convenient through mobile apps and user-friendly interfaces, while AI and machine learning enhance efficiency by optimizing delivery routes, forecasting demand, and personalizing recommendations. Innovations like contactless deliveries and drone usage are further improving safety and efficiency.
IMARC Group expects the United States online food delivery market to hit around $68.60 billion by 2032, exhibiting a CAGR of 9.8%.
Considering the industry's strong prospects, it may be prudent to invest in fundamentally sound food and beverage stocks like PEP, COKE, and WHGLY.
PepsiCo, Inc. (PEP)
PEP operates globally through its manufacturing, distribution, marketing and the sale of different beverages as well as food. There are seven segments through which the company operates, namely, 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 October 1st, the company announced that it had completed the acquisition of Garza Food Ventures LLC dba Seite Foods, a popular Mexican-American food brand, at $1.20 billion. This agreement is being carried forward to increase the company’s product portfolio with authentic Mexican-American brands, making it a multicultural portfolio.
Moreover, on September 30, PEP paid a quarterly dividend of $1.355 per share, a 7% rise year-over-year. It pays an annual dividend of $5.42, which translates to a dividend yield of 3.16% at the prevailing price levels. It has consistently increased its dividend payments for the past 51 years.
During the fiscal third quarter that ended September 7, 2024, PEP’s total net revenue was $ 23.32 billion. Its operating profit is $3.87 billion. In addition, the company’s non-GAAP net income attributable to PEP came in at $3.19 billion or $2.31 per share, up 2.6% and 2.7% from the prior year’s period, respectively.
Analysts expect PEP’s EPS and revenue for the quarter ending December 31, 2024, to increase to 9.4% and marginally year-over-year to $1.95 and $27.98 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters, which is impressive.
Over the past year, the stock has gained 5.8% to close the last trading session at $171.79. It soared 1.2% year-to-date.
PEP’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
PEP has an A grade in Quality and a B grade in Growth. It is ranked #12 out of 33 stocks in the B-rated Beverages Industry.
Beyond what we have stated above, we also have given PEP grades for Sentiment, Momentum, Value, and Stability. Get all the PEP’s ratings here.
Coca-Cola Consolidated, Inc. (COKE)
COKE is reputed for producing, distributing, and advertising non-alcoholic beverages. It distributes its products directly to grocery stores and mass merchandise retail.
On September 17, COKE entered into an agreement with BACARDÍ rum to debut its ready-to-drink (RTD) pre-mixed cocktail. The intent behind this agreement is to reach out to a wider consumer base through this collaboration.
On August 20, COKE announced a significant hike in its quarterly dividend, raising it from $0.50 to $2.50 per share. This enhanced dividend will be distributed on November 8, 2024.
Currently, COKE pays an annual dividend of $26, equating to a yield of 2.08% based on the current share price, well above its four-year average dividend yield of 0.66%. Additionally, the company’s dividend payouts have grown at a compound annual growth rate of 58.7% over the past three years.
During the second quarter ended June 28, COKE’s net sales rose 3.3% year-over-year to $1.80 billion. Its gross profit grew 6.7% from the prior-year quarter to $716.70 million, and adjusted net income improved 11.8% year-over-year to $192.80 million.
The stock climbed 34.5% year-to-date and has surged 94.4% over the past year to close the last trading session at $1,248.85.
COKE’s POWR Rating reflects strong prospects. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
It has a B for Quality and Sentiment. It is ranked #6 out of 33 stocks in the Beverage industry.
To access COKE’s Growth, Value, Stability, and Momentum ratings, click here.
WH Group Limited (WHGLY)
Headquartered in Hong Kong, WHGLY is an investment holding company that is reputed for the production, trade, wholesale as well as retail of meat products in China, the United States, Mexico, and Europe.
WHGLY pays an annual dividend of $0.89, which translates to a yield of 5.58% at the current share price, higher than its four-year average dividend yield of 4.75%. Moreover, the company’s dividend payouts have increased at a CAGR of 25.7% over the past three years.
During the six months ended June 30, 2024, WHGLY reported a revenue of $12.29 billion. Its operating profit and profit attributable to owners of the company rose 78.4% and 81.2% year over year to $1.14 billion and $694 million.
The stock climbed 24.1% year-to-date and has returned 43.3% over the past year to close the last trading session at $16.02.
WHGLY’s bright prospects are apparent in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A in Value and a B grade for Growth and Stability. Within the 74 stocks in the B-rated Food Makers industry, it is ranked #3.
Click here to see WHGLY’s ratings for Sentiment, Quality, and Momentum.
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.
PEP shares were trading at $169.95 per share on Monday afternoon, down $1.84 (-1.07%). Year-to-date, PEP has gained 2.40%, versus a 23.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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