The beverage industry is expected to thrive due to inelastic demand, changing consumer preferences, technological advancements, and effective marketing strategies, all of which are expected to drive future growth.
Given the industry’s growth prospects, fundamentally strong beverage stocks Fomento Económico Mexicano, S.A.B. de C.V. (FMX), Kirin Holdings Company, Limited (KNBWY) and Coca-Cola HBC (CCHGY) might be worth buying.
Before discussing the fundamentals of these stocks in detail, let’s see what’s driving the beverage industry.
In 2024, the global non-alcoholic beverages market is expected to attain a value of $987.30 billion, and it is poised for significant expansion, reaching a projected value of $1.89 trillion by 2034, exhibiting a CAGR of 6.7% during the forecast period.
The global ready-to-drink beverage market is expected to reach $176.57 billion by 2030, expanding at a 7.1% CAGR. The growth of the ready-to-drink beverage market can be attributed to the increasing demand for convenience and on-the-go consumption. Additionally, the rising popularity of healthier beverage options among consumers is also driving market growth.
In addition, the global functional beverages market is expected to grow at a 5.9% CAGR to $207.77 billion by 2028. The growing demand for functional beverages is driven by health-conscious consumers seeking healthier options with added benefits like improved energy, immunity, and digestion, resulting in market growth.
Considering these conducive trends, let’s take a look at the fundamentals of the three above-mentioned Beverages stocks, starting with the third pick.
Stock #3: 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 EV/EBITDA multiple, FMX is trading at 8.64 is 21.7% lower than the industry average of 11.18. In addition, FMX’s trailing-12-month EV/Sales of 1.20x is 27.2% lower than the industry average of 1.64x.
FMX’s trailing-12-month net income margin of 8.92% is 87.6% higher than the industry average of 4.76%. Its trailing-12-month ROTA is 8.30% is 80.8% higher than the industry average of 4.59%.
FMX’s total revenue increased 19.3% year-over-year to Mex$188.10 billion ($10.96 billion) in the third quarter that ended September 30, 2023. The company’s gross profit rose 22.1% from the year-ago value to Mex$72.08 billion ($4.20 billion), while its income from operations grew 12.6% from the prior-year quarter to Mex$15.93 billion ($928.57 million).
Also, its EBITDA increased 15.1% from the year-ago value to Mex$25.37 billion ($1.48 billion).
FMX’s revenue grew at CAGR of 15.4% over the past three years. In addition, its net income grew at 154.7% CAGR over the past three years.
Analysts expect FMX’s revenue to increase 6.9% year-over-year to $47.63 billion for the year ending December 2024. Its EPS is expected to come in at $5.68 for the same period. It is expected to surpass EPS in three of four trailing quarters. The stock has gained 65.8% over the past year to close the last trading session at $140.14.
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 a B grade for Growth, Stability, Sentiment and Quality. Within the B-rated Beverages industry, it is ranked #12 out of 34 stocks. To see additional POWR Ratings for Value and Momentum for FMX, click here.
Stock #2: Kirin Holdings Company, Limited (KNBWY)
Headquartered in Tokyo, Japan, KNBWY engages in the food and beverages, pharmaceuticals, and health science businesses. The company offers beer, wine, and spirits; dairy products; pharmaceutical products; and biochemical products. In addition, it operates factories and theme park businesses and manages a chain of Kirin City beer pubs.
KNBWY’s forward EV/Sales of 1.24x is 24.4% lower than the industry average of 1.64x. Its forward Price/Sales of 0.83x is 25.2% lower than the industry average of 1.12x.
KNBWY’s trailing-12-month CAPEX / Sales of 5.70% is 78.6% higher than the 3.19% industry average. Its trailing-12-month gross profit margin of 45.28% is 34.4% higher than the 33.70% industry average.
For the year that ended December 31, 2023, KNBWY’s revenue grew 7.3% year-over-year to ¥2.13 trillion ($14.18 billion). The company’s profit increased 4.6% from the year-ago value to ¥150.44 billion ($999.12 million). Its earing per share came in at ¥139.16, up 3% from the previous year’s quarter.
Furthermore, as of September 30, 2023, the company’s total assets were ¥2.87 trillion ($19.06 billion), compared to ¥2.54 trillion ($17.52 billion) as of December 31, 2022.
KNBWY’s revenue grew at CAGR of 3.7% over the past three years. In addition, its total assets grew at 6.6% CAGR over the past three years.
The consensus revenue came in at $14.61 billion for the fiscal year ending December 2024 represents a 3.3% increase year-over-year. Its EPS is expected to grow 19.8% year-over-year to $1.17 for the same period. KNBWY’s shares have gained 4.4% past six months to close the last trading session at $14.39.
It’s no surprise that KNBWY has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Value, Growth, Stability and Quality. It is ranked #7 in the same industry.
Beyond what is stated above, we’ve also rated KNBWY for Sentiment and Momentum. Get all KNBWY ratings here.
Stock #1: Coca-Cola HBC (CCHGY)
Based in Steinhausen, Switzerland, CCHGY engages in the production, distribution, and sale of non-alcoholic ready-to-drink beverages internationally. The company markets and sells its products under Coca-Cola, Fanta, Sprite, Adez, Amita, Aperol, Avra, Fruice, Kinley, and other brands.
CCHGY’s forward EV/Sales of 1.15x is 30.1% lower than the industry average of 1.64x. Its forward Price/Sales of 0.92x is 18% lower than the industry average of 1.12x.
CCHGY’s trailing-12-month ROCE of 20.64% is 80.6% higher than the industry average of 11.43%. Its 6.48% trailing-12-month net income margin is 36.2% higher than the 4.76% industry average.
For the year that ended December 31, 2023, CCHGY’s net sales revenue increased 10.7% year-over-year to €10.18 billion ($10.90 billion). Its operating profit grew 35.5% year-over-year to €953.60 million ($1.02 billion). The company’s comparable EBIT was €1.08 billion ($1.16 billion), an increase of 16.6% from the previous year’s period.
In addition, CCHGY’s net profit and comparable EPS rose 53.2% and 52.6% year-over-year to €636.50 million ($681.46 million) and €1.73, respectively.
CCHGY’s revenue grew at CAGR of 15.5% over the past three years. In addition, its net income grew at 15.9% CAGR over the past three years.
Street expects CCHGY’s revenue to come in at $11.62 billion for the year ending December 2024, increase 4.4% year-over-year. Shares of CCHGY have gained 17.7% over the past year to close the last trading session at $27.58.
CCHGY has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
CCHGY’s is ranked #2 in the same industry. It has an A grade for Stability and a B for Growth and Value. To see additional CCHGY’s ratings for Sentiment and Quality, click here.
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.
FMX shares were trading at $141.30 per share on Wednesday afternoon, up $1.16 (+0.83%). Year-to-date, FMX has gained 8.40%, versus a 4.27% 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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