Changing consumer preferences and increasing awareness regarding the need for an healthy lifestyle has led to an upsurge in the demand for non-alcoholic or low alcohol drinks, which is driving the growth of the beverage market.
Therefore, fundamentally strong beverage stocks, Fomento Económico Mexicano, S.A.B. de C.V. (FMX), Keurig Dr Pepper Inc. (KDP), and Molson Coors Beverage Company (TAP), could be worth adding to your portfolio now.
With consumer shifting to no-alcohol and low-alcohol categories, market producers are adapting to the new trends and developing new products. The global non-alcoholic beverages market is anticipated to grow at a 6.4% CAGR until 2030.
Additionally, the market for functional drinks is a fast-expanding section of the global beverage industry. These beverages are intended to deliver certain functional advantages such as improved cognitive function, greater energy, weight control, and improved digestion. The global functional beverages market is expected to grow at a CAGR of 9.2% until 2033.
Let’s delve deeper into the fundamentals of the stocks.
Fomento Económico Mexicano, S.A.B. de C.V. (FMX)
Based in Monterrey, Mexico, FMX, through its subsidiaries, operates as a bottler of Coca-Cola trademark beverages.
In terms of trailing-12-month Price/Sales multiple, FMX is trading at 0.84 is 25.6% lower than the industry average of 1.12. In addition, FMX’s trailing-12-month EV/Sales of 1.05x is 38.1% lower than the industry average of 1.69x.
FMX’s trailing-12-month net income margin of 9.64% is 205.5% higher than the industry average of 3.16%. Its trailing-12-month ROTA is 8.39% is 97.7% higher than the industry average of 4.24%.
FMX’s total revenue increased 21.9% year-over-year to Mex$180.01 billion ($10.23 billion) in the first quarter that ended March 31, 2023. The company’s gross profit rose 23% from the year-ago value to Mex$67.01 billion ($3.81 billion), while its income from operations grew 13.3% from the prior-year quarter to Mex$12.54 billion ($712.56 million).
Also, its EBITDA increased 13.3% from the year-ago value to Mex$22.16 billion ($1.26 billion).
Analysts expect FMX’s revenue to increase 18.3% year-over-year to $43.26 billion in 2023. Its EPS is expected to grow 33.1% to $4.72 in 2023. FMX’s shares have gained 52.9% over the past nine months to close the last trading session at $100.93.
FMX’s POWR Ratings reflect this promising outlook. The stock 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.
FMX has an A grade for Sentiment and a B for Stability and Quality. Within the A-rated Beverages industry, it is ranked #18 out of 37 stocks. Click here for the additional POWR Ratings for Growth, Value, and Momentum for FMX.
Keurig Dr Pepper Inc. (KDP)
KDP operates as a beverage company in the United States and internationally. It operates through four segments: Coffee Systems; Packaged Beverages; Beverage Concentrates; and Latin America Beverages.
KDP’s forward Price/Book multiple of 1.76 is 37.1% lower than the industry average of 2.81. Its forward non-GAAP P/E multiple of 18.32 is 4.4% lower than the industry average of 19.16.
Its trailing-12-month levered FCF margin of 12.26x is 355.9% higher than the 2.69x industry average. Its trailing-12-month EBIT margin of 19.96% is 199.4% higher than the 6.67% industry average.
KDP’s net sales for the first quarter ended March 31, 2023, came in at $3.35 billion, up 8.9% year-over-year. Its gross profit came in at $1.74 billion, up 5.7% year-over-year. Also, its total liabilities came in at $26.56 billion for the period that ended March 31, 2023, compared to $26.71 billion for the period that ended December 31, 2022.
KDP’s revenue is expected to increase 5.3% year-over-year to $14.80 billion in 2023. The company’s EPS for the same period is expected to grow 6.1% to $1.78. KDP’s shares have gained marginally intraday to close the last trading session at $32.67.
It’s no surprise that KDP has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B for Growth and Quality. It is ranked #20 in the same industry.
Beyond what is stated above, we’ve also rated KDP for Value, Sentiment, Momentum, and Stability. Get all KDP ratings here.
Molson Coors Beverage Company (TAP)
TAP manufactures, markets, and sells beer and other malt beverage products under various brands in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.
TAP’s trailing-12-month Price/Book multiple of 1.05 is 62.7% lower than the industry average of 2.81. Its trailing-12-month Price/Cash Flow multiple of 7.99 is 42.1% lower than the industry average of 13.80.
TAP’s trailing-12-month EBIT margin of 8.40x is 26% higher than the 6.67x industry average. Its trailing-12-month EBITDA margin of 14.70% is 42.1% higher than the 10.34% industry average.
TAP’s net sales came in at $2.35 billion for the fiscal first quarter that ended March 31, 2023, up 5.9% year-over-year. Also, its gross profit increased 24.8% year-over-year to $1.58 billion.
Also, its total liabilities came in at $12.95 billion for the period that ended December 31, 2022, compared to $12.93 billion for the period that ended March 31, 2023.
Street expects TAP’s revenue to increase 4.7% year-over-year to $11.21 billion in 2023. Its EPS is expected to increase 5.6% year-over-year to $4.33 in 2023. Over the past three months, the stock has gained 24.9% to close its last trading session at $64.25.
TAP’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, translating to Buy in our proprietary rating system.
It also has an A grade for Growth. It is ranked #19 within the same industry. Click here to see the additional ratings for TAP (Stability, Value, Sentiment, Momentum, and Quality).
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FMX shares were trading at $101.89 per share on Monday afternoon, up $0.96 (+0.95%). Year-to-date, FMX has gained 31.79%, versus a 8.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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