Australia markets closed
  • ALL ORDS

    7,137.60
    -11.00 (-0.15%)
     
  • ASX 200

    6,955.20
    -13.40 (-0.19%)
     
  • AUD/USD

    0.6647
    -0.0045 (-0.67%)
     
  • OIL

    69.34
    -0.62 (-0.89%)
     
  • GOLD

    1,980.40
    -15.50 (-0.78%)
     
  • Bitcoin AUD

    41,684.29
    -765.15 (-1.80%)
     
  • CMC Crypto 200

    601.99
    -16.40 (-2.65%)
     
  • AUD/EUR

    0.6176
    +0.0006 (+0.09%)
     
  • AUD/NZD

    1.0713
    +0.0017 (+0.16%)
     
  • NZX 50

    11,580.81
    -14.13 (-0.12%)
     
  • NASDAQ

    12,716.64
    -12.59 (-0.10%)
     
  • FTSE

    7,405.45
    -94.15 (-1.26%)
     
  • Dow Jones

    32,178.76
    +73.51 (+0.23%)
     
  • DAX

    14,957.23
    -253.16 (-1.66%)
     
  • Hang Seng

    19,915.68
    -133.96 (-0.67%)
     
  • NIKKEI 225

    27,385.25
    -34.36 (-0.13%)
     

2 Beverage Stocks Poised to Outperform in Q4 Earnings

The Beverages industry has showcased resilient trends in recent months due to the recovery across markets and channels, robust demand for premium and high-quality products, market share growth, improved pricing, and a nag for innovative products. Investments in product innovations, premiumization and technology platforms bode well for players. These favorable trends are likely to have bolstered the top and bottom-line performances of beverage companies in the to-be-reported quarter.

Companies are also expected to have gained from accelerating digital investments, momentum in spirits and expansion into newer categories, including the Ready-to-Drink (RTD) category. Notably, RTD has emerged as the fastest-growing alcohol segment since 2018. Most companies in the industry have been collaborating with counterparts to grow their market share in the fast-growing RTD category.

Beverage companies have been investing in the latest capabilities, and leveraging technology to better connect with customers and consumers to expand their digital capabilities. Additionally, companies have been benefiting from price increases and supply productivity savings, offsetting the effects of cost inflation. Effective marketing and exceptional commercial execution have been boosting the sales of beverage companies.

However, margins are likely to have been an area to watch in the quarter under review. Players in the beverage industry are anticipated to have witnessed higher advertising and promotional expenses, and SG&A costs. Additionally, the industry players have been experiencing elevated ingredient and other input costs, including shipping and freight, labor, trucking, fuel, co-packing fees, secondary packaging materials, and increased outbound freight costs, leading to increased costs of sales and higher operating costs. These are expected to have dented the gross and operating margins in the to-be-reported quarter.

The Winning Strategy

A strategy to arrive at the potential winners is by picking stocks that have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their upcoming earnings announcement. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chances of a positive earnings surprise are as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Q4 Expectations

The Beverage industry, which is part of the Zacks Consumer Staples sector, seems poised for growth in the fourth quarter of 2022, owing to the aforementioned trends and initiatives of players. Overall earnings for the Consumer Staple sector are projected to witness a year-over-year decline of 4.4% despite 4.8% higher revenues, per the latest Earnings Preview.

Some of the industry players, which are lined up to report earnings in the coming weeks, are PepsiCo Inc. PEP, The Boston Beer Co. Inc. SAM, The Coca-Cola Company KO and Molson Coors Beverage Company TAP.

PepsiCo looks well-poised for growth in the fourth quarter of 2022, driven by the resilience and strength of global beverage and convenient food businesses. PEP is expected to register top and bottom-line growth when it reports fourth-quarter results. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $26.8 billion, implying 6.2% growth from the year-ago quarter's reported figure.

For PepsiCo’s quarterly earnings, the Zacks Consensus Estimate is pegged at $1.64 per share, suggesting 7.2% growth from $1.53 reported in the prior-year quarter. The consensus mark has been unchanged in the past 30 days.

Boston Beer’s fourth-quarter results are expected to reflect gains from strong pricing across its portfolio, growth in depletions and shipments, and focus on innovation to revive the Truly brand and expand Twisted Tea’s potential. SAM is expected to register top and bottom-line growth when it reports fourth-quarter results. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $403.2 million, implying 15.8% growth from the year-ago quarter's reported figure.

For Boston Beer’s quarterly earnings, the Zacks Consensus Estimate is pegged at 64 cents per share, suggesting 811.1% growth from the prior-year quarter’s reported figure. The consensus mark has moved down 5.9% in the past 30 days.

Our Picks

Of the companies slated to report earnings, we have identified two beverage stocks that are poised to trump fourth-quarter earnings estimates.

Coca-Cola, the soft-drinks behemoth, is likely to record top-line growth and flat earnings when it reports fourth-quarter 2022 numbers on Feb 14, 2023. The company’s fourth-quarter performance is expected to have benefited from revenue growth across its operating segments, aided by an improved price/mix and an increase in concentrate sales. Underlying share gains in both at-home and away-from-home channels are also expected to have bolstered the performance.

Currently, Coca-Cola has a Zacks Rank #2 and an Earnings ESP of +2.98%. The New York City-based company registered an earnings surprise of 8.8%, on average, in the trailing four quarters. The Zacks Consensus Estimate for KO’s fourth-quarter revenues is pegged at $9.97 billion, suggesting 5.3% growth from the prior-year quarter’s reported figure. For fourth-quarter earnings, the consensus mark is pegged at 45 cents per share, flat with the year-ago quarter’s reported figure. The consensus mark has moved down 4.3% in the past 30 days.

CocaCola Company (The) Price and EPS Surprise

 

CocaCola Company (The) Price and EPS Surprise
CocaCola Company (The) Price and EPS Surprise

CocaCola Company (The) price-eps-surprise | CocaCola Company (The) Quote

Molson Coors’ fourth-quarter 2022 results, scheduled to be released on Feb 21, are likely to reflect gains from a favorable sales mix and improved pricing trends across regions. Strength across its Coors Light and Miller Lite brands, as well as the beyond beer approach, bodes well. Also, the company has been gaining from the revitalization plan and the premiumization of its global portfolio. TAP is likely to record top and bottom-line growth when it reports fourth-quarter 2022 numbers.

Molson Coors, a manufacturer and seller of beer and other beverage products, has an Earnings ESP of +2.24% and a Zacks Rank #3 at present. The company delivered an earnings surprise of 12.3%, on average, in the trailing four quarters. The Zacks Consensus Estimate for TAP’s fourth-quarter revenues is pegged at $2.68 billion, suggesting 2.2% growth from the prior-year quarter’s reported figure. For fourth-quarter earnings, the consensus mark is pegged at $1.06 per share, suggesting 30.9% growth from the year-ago quarter’s reported figure. The consensus mark has moved up by a penny in the past seven days.

Molson Coors Beverage Company Price and EPS Surprise

 

Molson Coors Beverage Company Price and EPS Surprise
Molson Coors Beverage Company Price and EPS Surprise

Molson Coors Beverage Company price-eps-surprise | Molson Coors Beverage Company Quote

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

CocaCola Company (The) (KO) : Free Stock Analysis Report

PepsiCo, Inc. (PEP) : Free Stock Analysis Report

Molson Coors Beverage Company (TAP) : Free Stock Analysis Report

The Boston Beer Company, Inc. (SAM) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research