The food and beverages industry is always evolving, and right now, it’s being driven by a growing focus on the health and nutrition sector in the market. As more consumers focus on healthier and more nutritious options, companies are adapting their menus to meet these demands. This means a greater emphasis on healthier options, from low-sugar and no-sugar products to plant-based alternatives.
Given this shift, it could be wise to consider investing in companies that are leading the way in these health trends. Brands like The Coca-Cola Company (KO), Starbucks Corporation (SBUX), and Sysco Corporation (SYY) are all adapting their product lines to cater to the growing demand for healthier choices.
A recent survey by Statista shows that half of consumers are actively trying to eat healthier. Moreover, nearly 94% believe finding healthier choices when shopping for food and beverages is essential. In fact, 44% of people are likely to incorporate healthier beverages, like gut-friendly sodas and electrolyte-enhanced waters, into their routines.
With the global health and wellness food market projected to hit $2.10 trillion by 2032, growing a CAGR of 7.2%, and the healthy food industry set to expand from $988.46 billion in 2024 to $1.41 trillion by 2032, there’s a clear trend toward more health-conscious eating. Meanwhile, the health drinks market is expected to grow at a CAGR of 3.5%, reaching $408.80 billion by 2028.
Given this backdrop, companies like KO, SBUX, and SYY, tapping into these health trends and innovating with more natural and nutritious ingredients, are well-positioned to thrive in this evolving market. Let’s examine the fundamental factors of the featured stocks in detail:
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.
On July 29, demonstrating its commitment to returning value to shareholders, the company declared a quarterly dividend of $0.495 per share. This dividend will be paid on October 1 to shareholders on record as of September 13, 2024.
Having earned the status of a Dividend King, KO pays an annual dividend of $1.94, which translates to a yield of 2.80% at the current share price. Its four-year average dividend yield is 2.99%. Over the past three years, its dividend payouts have increased at a CAGR of 4.4%.
In terms of the trailing-12-month gross profit margin, KO’s 60.53% is 69.7% higher than the 35.67% industry average. Similarly, its 32.08% trailing-12-month EBITDA margin is 141.7% higher than the industry average of 5.5213.27%. Also, its trailing-12-month ROCE of 41.06% compares to the industry average of 10.84%.
For the second quarter of 2024, which ended on June 28, KO’s net operating revenues increased 3.3% year-over-year to $12.36 billion. Its gross profit rose 7% from the year-ago value to $7.55 billion. Its operating income stood at $2.63 billion, up 9.6% year-over-year, while its non-GAAP net income amounted to $3.62 billion, representing an increase of 6.8% from the last year. Also, the company’s non-GAAP EPS for the quarter increased 7.7% year-over-year to $0.84.
KO updated its full-year guidance for 2024, and the company expects organic revenue growth to be 9% to 10%. KO’s comparable EPS (non-GAAP) growth is expected to be 5% to 6%, compared to $2.69 in 2023. It anticipates generating a free cash flow of nearly $9.20 billion.
Analysts expect KO’s EPS for the third quarter (ending September 2024) to increase marginally year-over-year to $0.75 and its revenue to be $11.67 billion. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is excellent.
Over the nine months, the stock has surged 18.9%, closing the last trading session at $69.33.
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 34 stocks in the B-rated Beverages industry, it is ranked #17. Click here to see the additional ratings for KO (Growth, Value, and Momentum).
Starbucks Corporation (SBUX)
The renowned specialty coffee retailer SBUX operates through three segments: North America; International; and Channel Development. Its stores offer coffee and tea beverages, roasted whole beans and ground coffees, single-serve products, ready-to-drink beverages, and various quick bites.
The retailer is focusing on expanding plant-based options as part of a shift toward a more environmentally friendly menu. The company also emphasizes healthier food choices like protein boxes, salads, and snacks made with wholesome ingredients.
With a record of 13 years of consecutive dividend growth, SBUX has consistently rewarded its shareholders. On June 20, the company declared a monthly cash dividend of $0.57 per common share, set to be paid on August 30, 2024.
SBUX pays an annual dividend of $2.28, which translates to a yield of 2.47% at the current share price. Its four-year average dividend yield is 2.05%. Also, its dividend payouts have increased at an 8.2% CAGR over the past three years and a 9.6% CAGR over the past five years.
The stock’s trailing-12-month EBITDA margin of 19.41% is 69.7% higher than the industry average of 11.44%. Similarly, its 11.16% trailing-12-month net income margin is 144.9% above the industry average of 4.56%. Also, its trailing-12-month ROTA of 13.52% compares favorably to the industry average of 4.15%.
SBUX’s total net revenues for the nine-month period, which ended on June 30, 2024, increased by 1.9% year-over-year to $27.10 billion. However, net earnings attributable to SBUX stood at $2.85 billion or $2.51 per share, slightly below the $2.90 billion or $2.52 per share recorded in the same period last year. Nonetheless, its net cash flow from operating activities increased 12.2% year-over-year to $4.56 billion.
Street expects SBUX’s revenue for the fourth quarter (ending September 2024) to increase marginally year-over-year to $9.40 billion. However, the consensus EPS estimate of $1.04 for the same period indicates a 1.6% year-over-year decline.
SBUX shares have surged 20.7% over the past month to close the last trading session at $92.43.
SBUX’s mixed fundamentals are reflected in its POWR Ratings. It has a B grade for Quality and is ranked #23 out of 41 stocks in the Restaurants industry.
Beyond what is stated above, we’ve also rated SBUX for Growth, Value, Momentum, Stability, and Sentiment. Get all SBUX ratings here.
Sysco Corporation (SYY)
SYY sells, markets, and distributes food products to restaurants, healthcare and educational facilities, lodging establishments, and other customers who prepare meals away from home globally. It operates through four segments: U.S. Foodservice Operations; International Foodservice Operations; SYGMA; and Other.
One of SYY’s strategies includes delivering delicious food options, recipes, and nutritional information that reflect preferences toward mindful lifestyles. It also strives to offer the widest range of dietary options for customers to choose from while meeting specific standards with regard to ingredient statements and nutritional labeling.
On August 15, buoyed by its strong financial performance, the company declared a quarterly dividend of $0.51 per share, payable to its shareholders on October 25, 2024.
SYY pays an annual dividend of $2.04, which translates to a yield of 2.63% at the current share price. Its four-year average dividend yield is 2.51%. Moreover, the company’s dividend payouts have increased at a CAGR of 5.6% over the past five years.
SSY’s trailing-12-month ROTC and ROTA of 15.79% and 7.85% are 128.2% and 71.7% higher than their respective industry averages of 6.92% and 4.57%. Likewise, its trailing-12-month asset turnover ratio of 3.30x compares to the industry average of 0.85x.
In the fiscal fourth quarter that ended on June 29, 2024, SYY’s sales increased 4.2% year-over-year to $20.56 billion. The company’s non-GAAP operating income rose 6.5% from the prior year’s quarter to $1.08 billion, with a non-GAAP operating margin of 5.27% (up 11 bps year-over-year). SYY’s non-GAAP net income came in at $693 million, up 1.5% year-over-year, while its adjusted EPS grew 3.7% from the year-ago value to $1.39.
The consensus revenue estimate of $20.48 billion for the fiscal first quarter (ending September 2024) represents a 4.4% increase year-over-year. The consensus EPS estimate of $1.13 for the ongoing quarter indicates a 5.7% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of SYY have gained 10.5% over the past year to close the last trading session at $77.58.
It’s no surprise that SYY has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Value, Stability, and Quality. Within the B-rated Food Makers industry, it is ranked #13 out of 74 stocks.
Click here to access the other ratings of SYY for Growth, Momentum, and Sentiment.
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KO shares were trading at $68.98 per share on Friday afternoon, down $0.35 (-0.50%). Year-to-date, KO has gained 18.91%, versus a 18.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
3 Food and Beverage Stocks That Are Tapping Into Health Trends StockNews.com
