Driven by steady demand for its products and several opportunities arising from evolving consumer preferences, the beverage industry is well-positioned for continued resilience and growth. Growing awareness of the importance of a healthy diet and an active lifestyle led to a surge in demand for reduced or non-sugar, non-alcoholic, or plant-based beverages.

Given the industry’s bright prospects, fundamentally sound beverage stocks Carlsberg A/S (CABGY), Coca-Cola Consolidated, Inc. (COKE), and Primo Water Corporation (PRMW) could be ideal buys in November for solid returns.

In an uncertain economy, the beverage industry has remained resilient and is poised for significant growth, driven by steady consumer demand despite high prices. There is a growing consumer inclination toward sugar-free drinks amid rising health awareness worldwide and the increasing prevalence of diseases such as diabetes and obesity.

According to a report by Future Market Insights, the global zero-sugar beverage market is projected to exceed more than $13.15 billion by 2033, expanding at a CAGR of 14.7%.

The rapid shift in consumer preference for non-alcoholic beverages is the beverage industry’s key growth driver. In recent years, there has been a considerable surge in demand for non-alcoholic drinks as they are perceived as healthier and more natural alternatives. The market for non-alcoholic beverages accounts for more than 50% of the share of the global beverage market.

The global non-alcoholic beverages market is expected to reach $1.26 trillion by 2027, exhibiting a CAGR of 8.2% during the forecast period (2023-2027).

Further, the rising prevalence of lactose intolerance and dairy allergies resulted in the penetration of plant-based beverages like fruit and vegetable juices. Also, growing affinity toward organic and clean-label products influences manufacturers to develop and introduce innovative variants in the ready-to-drink beverages category.

As per a report by Mordor Intelligence, the global beverage market is expected to grow from $3.56 trillion in 2023 to $4.39 trillion by 2028 at a CAGR of 4.3% during the forecast period (2023-2028).

Given these encouraging trends, let’s look at the fundamentals of the three best Beverages stocks, beginning with the third choice.

Stock #3: Carlsberg A/S (CABGY)

Headquartered in Copenhagen, Denmark, CABGY produces, markets, and sells beer and other products globally. The company provides core and craft & specialty beers and alcohol-free brews. It mainly offers products under the Carlsberg, Chongqing, Tuborg, Feldschlösschen, 1664 Blanc, Baltika, Chongqing, Ringnes, and Somersby brand names.

On May 8, CABGY launched Somersby Apple Lite with 52% fewer calories than the original Somersby Apple Cider. With the growing consumer demand for light and low-calorie products and a strong focus on health, it is the right time to launch Somersby Apple Lite. This new product offering might extend CABGY’s customer reach and drive profitability.

CABGY’s trailing-12-month gross profit margin of 44.83% is 32.9% higher than the 33.7% industry average. Moreover, the stock’s trailing-12-month EBIT margin and net income margin of 14.35% and 10.62% are higher than respective industry averages of 8.40% and 4.90%.

Over the past three years, CABGY’s revenue and net income have increased at CAGRs of 5.6% and 6.7%, respectively. Also, the company’s EPS has grown at a CAGR of 9.4% over the same period, while its levered free cash flow has improved at a 11% CAGR.

According to the trading statement for the third quarter ended September 30, 2023, CABGY’s total revenue grew marginally year-over-year to DKK 20.29 billion ($2.97 billion). Its reported revenue growth from the Western Europe and Central & Eastern Europe regions were 5.4% and 5.2% year-over-year, respectively.

Further, the company maintained its earnings guidance for the fiscal year 2023. CABGY expects organic growth in operating profit to be between 4% to 7%.

Analysts expect CABGY’s revenue for the fiscal year (ending December 2023) to increase 6.1% year-over-year to $10.74 billion. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 4.2% and 7.9% from the prior year to $11.20 billion and $7.26, respectively.

Shares of CABGY have declined marginally over the past month to close the last trading session at $24.66.

CABGY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has a B grade for Quality and Stability. CABGY has ranked #12 out of 33 stocks in the A-rated Beverages industry.

In addition to the POWR Ratings I’ve just highlighted, you can see CABGY’s ratings for Growth, Momentum, Sentiment, and Value here.

Stock #2: Primo Water Corporation (PRMW)

PRMW offers pure-play water solutions for residential and commercial customers. The company provides under the Primo, Alhambra, Mountain Valley, Deep Rock, Hinckley Springs, Sierra Springs, Sparkletts, and Renü brands in the U.S.; Canadian Springs, Labrador Source, and Amazon Springs brands in Canada; and Decantae, Eden, and Mey Eden brands in Europe and Israel.

On November 2, PRMW entered a definitive agreement to sell a significant portion of Primo Water’s International businesses in an all-cash transaction valued at up to $575 million. Primo Water believes shareholders will benefit from an improved financial profile.

“The Transaction was the result of a proactive board-led process that resulted in an agreement that offers an attractive premium valuation for a significant portion of our international businesses and simplifies and focuses Primo Water on our core North American water business,” said Tom Harrington, Primo Water’s CEO.

“Looking ahead, we will be laser-focused on growing the North American business, increasing our profitability and margins, enhancing our balance sheet strength, and returning capital to shareowners,” Harrington added.

PRMW’s trailing-12-month gross profit margin of 60.9% is 80.4% higher than the 33.72% industry average. In addition, the stock’s trailing-12-month EBITDA margin of 18.63% is 64% higher than the industry average of 11.36%.

Over the past three years, PRMW’s revenue and EBIT have increased at CAGRs of 6.7% and 21.9%, respectively. Also, the company’s normalized net income has grown at a CAGR of 87.6% over the same period.

PRMW’s net revenue increased 6.4% year-over-year to $622 million for the third quarter ended September 30, 2023. Its adjusted EBITDA came in at $140.90 million, up 20.5% from the prior year’s quarter. The company’s adjusted net income was $52.20 million, or $0.33 per share, compared to $35.70 million, or $0.22 per share a year ago, respectively.

The company’s solid third-quarter performance gives it confidence to reaffirm its 2023 outlook. PRMW expects revenue and adjusted EBITDA to be in the range of $2.32-$2.36 billion and $460-$480 million, respectively. Its full year adjusted free cash flow is now forecasted to rise to nearly $160 million, an increase of $10 million compared to its prior guidance.

Street expects PRMW’s revenue and EPS for the fiscal year (ending December 2023) to increase 5.7% and 23.9% year-over-year to $2.34 billion and $0.83, respectively. Moreover, the company has an impressive earnings surprise history as it surpassed the consensus EPS estimate in three of the trailing four quarters.

The stock has gained 8.1% over the past month and 4.3% over the past six months to close the last trading session at $14.33.

PRMW’s POWR Ratings reflect this solid outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system.

The stock has a B for Value, Sentiment, and Quality. In the 34-stock B-rated Beverages industry, PRMW is ranked #8.

In addition to the POWR Ratings I’ve just highlighted, you can see PRMW’s ratings for Growth, Momentum, and Stability here.

Stock #1: Coca-Cola Consolidated, Inc. (COKE)

COKE manufactures, markets, and distributes non-alcoholic beverages, primarily products of The Coca-Cola Company, in the U.S. The company provides sparkling beverages, still beverages such as energy products, and noncarbonated beverages, including bottled water, ready-to-drink coffee and tea, juices, and sports drinks.

On November 10, COKE paid a fourth quarter 2023 dividend of $0.50 per share on shares of the company’s common stock and Class B common stock to shareholders of record as of the close of business on October 27, 2023. Its annual dividend of $2 translates to a 0.28% yield on the current share price, while its four-year average dividend yield is 0.39%.

COKE’s trailing-12-month gross profit margin of 38.77% is 15% higher than the industry average of 33.72%. Also, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 35.47%, 25.51%, and 10.89% compare favorably to the industry averages of 11.68%, 6.92%, and 4.83%, respectively.

COKE’s revenue and EBITDA have grown at respective CAGRs of 10.4% and 32.7% over the past three years. Likewise, its net income has increased at a CAGR of 67.5% over the same period, and its EPS has improved at a CAGR of 67.7%. Also, the company’s levered FCF has increased at a 24.6% CAGR.

During the third quarter that ended September 29, 2023, COKE’s net sales increased 5.1% year-over-year to $1.71 billion. Its adjusted gross profit was $661.99 million, up 6.7% from the prior year’s quarter. The company’s adjusted income from operating rose 11.4% from the year-ago value to $216 million.

In addition, the company’s adjusted net income was $164.34 million, an increase of 18.4% from the previous year’s period. Its adjusted net income per share grew 18.4% year-over-year to $17.53.

COKE’s stock has surged 15.1% over the past month and 54.5% over the past year to close the last trading session at $716.36.

COKE’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

COKE has an A grade for Quality and a B for Stability and Sentiment. It is ranked #3 in the same industry.

To access additional ratings of COKE for Value, Growth, and Momentum, click here.

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CABGY shares were unchanged in premarket trading Tuesday. Year-to-date, CABGY has declined -5.35%, versus a 20.10% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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