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4 Beverage Stocks Set to Pull Off a Beat This Earnings Season

Investments in product innovations, premiumization and technology platforms have been boosting the spirits of players in the Beverage industry. Recovery across markets and channels, a nag for innovative products, robust demand for premium and high-quality products, market share growth, and improved pricing have been the key trends in the Beverage industry, which are expected to have bolstered the performances of participants in the fourth quarter of 2022.

Beverage companies have been putting their best foot forward to spice up their product lines. The companies have been continually developing products by blending the best qualities of different drinks, which has been blurring the lines between product categories. Notably, the Ready-to-Drink (RTD) has emerged as the fastest-growing alcohol category since 2018.

Beverage companies are also expected to have gained from accelerating digital investments. 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, players in the beverage industry are anticipated to have witnessed higher advertising and promotional expenses, and SG&A costs. These are expected to have hurt margins in the quarter under review. Elevated ingredient and other input costs, including shipping and freight, labor, trucking, fuel, co-packing fees, secondary packaging materials, and increased outbound freight costs, are expected to have resulted in increased costs of sales and higher operating costs, denting the gross and operating margins in the to-be-reported quarter.

How to Identify Potential Outperformers?

With the fourth-quarter earnings season in full swing, it is worthwhile to invest in companies with earnings beat potential, as a stock generally rallies on an earnings beat.

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 3.8% despite 4.8% higher revenues, per the latest Earnings Preview.

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

Our Picks

We have identified four beverage stocks that are poised to trump fourth-quarter earnings estimates.

PepsiCo is well-poised for growth when it reports fourth-quarter 2022 numbers on Feb 9, 2023, driven by the resilience and strength of global beverage and convenient food businesses. The Purchase, NY-based company registered an earnings surprise of 4.5%, on average, in the trailing four quarters. The company’s bottom line is likely to reflect the continued benefits of the mitigation of inflationary pressures through cost-management and revenue-management initiatives.

PepsiCo, Inc. Price and EPS Surprise

 

PepsiCo, Inc. Price and EPS Surprise
PepsiCo, Inc. Price and EPS Surprise

PepsiCo, Inc. price-eps-surprise | PepsiCo, Inc. Quote

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PEP is expected to register top and bottom-line growth in the fourth quarter. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $26.9 billion, implying 6.3% 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.

Coca-Cola, the soft-drink 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.

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

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 $9.98 billion, suggesting 5.4% 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.

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 on Feb 15, 2023. 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.

The Boston Beer Company, Inc. Price and EPS Surprise

 

The Boston Beer Company, Inc. Price and EPS Surprise
The Boston Beer Company, Inc. Price and EPS Surprise

The Boston Beer Company, Inc. price-eps-surprise | The Boston Beer Company, Inc. Quote

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 been unchanged in the past 30 days. The Boston, MA-based company registered a negative earnings surprise of 52.1%, on average, in the trailing four quarters.

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 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

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 2.4% 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 30 days.

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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

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