Back to top

Image: Bigstock

3 Beverage Stocks to Watch Out for in Q4 Earnings Season

Read MoreHide Full Article

The beverage industry was largely impacted by the coronavirus pandemic mainly due to the closure of the away-from-channels like restaurants, sporting events and movie theaters. Further, supply-chain disruptions and delayed shipments have been detrimental to the top lines of the industry players, which are expected to have continued to exert pressure in the fourth quarter as well.

However, recent trends show a marked improvement due to the resumption of economic activities and the partial reopening of away-from-home outlets. This is expected to get reflected in the form of improved sequential sales trends for beverage companies.

Additionally, beverage companies have been witnessing a splurge in at-home channel sales due to the shift in consumer habits and an increase in at-home consumption. The work-from-home trend and the inability to visit coffee shops have increased in-home coffee consumption, which has been strengthening market share for this category. Higher at-home beverage and coffee demand is likely to have compensated for the sluggishness in the away-from-home channel. Further, beverage companies have been increasingly investing in digital platforms, as consumers have shifted more to online purchases.

Also, beverage companies are likely to have gained from continued innovation, in terms of ingredients, formulation and packaging, owing to the shift in consumers’ preference to healthy drinks. Consequently, soft drink companies have improved focus on healthier alternatives, while alcohol companies have been switching to skew their portfolios toward drinks with low alcohol content. These initiatives have been aiding the demand for the industry participants’ products, resulting in improved sales and earnings trends.

Q4 Expectations

The Beverage industry, which is part of the Zacks Consumer Staples sector, seems poised for growth in the fourth quarter of 2020, owing to the aforementioned trends and initiatives of players. Three Beverage industry champions are lined up to report fourth-quarter earnings this week — The Coca-Cola Company (KO - Free Report) , PepsiCo Inc. (PEP - Free Report) and Molson Coors Beverage Company (TAP - Free Report) .

Overall earnings for the Consumer Staple sector are projected to witness year-over-year growth of 0.7% on 2.4% higher revenues, per the latest Earnings Preview.

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.

Our Picks

We have identified three beverage stocks, which are poised to trump fourth-quarter earnings estimates.

Molson Coors’ fourth-quarter 2020 results, scheduled to be released on Feb 11, are likely to be aided by favorable net pricing in the United States and Canada, cost savings, and lower marketing, general and administrative expenses. Further, the company is expected to have benefited from favorable shipments in the United States, which, though below the year-ago levels, are likely to have improved on a sequential basis.

Molson Coors, a manufacturer and seller of beer and other beverage products, has an Earnings ESP of +3.28% and a Zacks Rank #3 at present. The company delivered an earnings surprise of 61.3%, on average, in the trailing four quarters.

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

PepsiCo is one of the leading global food and beverage companies. Resilience and strength in the global snacks and foods business, and gains in the beverage category are likely to have aided the company’s fourth-quarter performance. It is also expected to have benefited from its strong portfolio of brands, a responsive supply chain and flexible go-to-market systems, which have helped maintain continued supplies amid the coronavirus pandemic.

Currently, it has an Earnings ESP of +0.59% and a Zacks Rank #3. The New York City-based company registered an earnings surprise of 6%, on average, in the trailing four quarters. It is scheduled to report results on Feb 11.

PepsiCo, Inc. Price and EPS Surprise


PepsiCo, Inc. Price and EPS Surprise

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

Monster Beverage Corporation (MNST - Free Report) is a marketer and distributor of energy drinks and alternative beverages. The company’s quarterly earnings are expected to have benefited from continued strength in its energy drink brands. Also, leveraged operating expenses are expected to have aided the operating margin.

The company currently has a Zacks Rank #3 and an Earnings ESP of +21.81%. The Corona, CA-based company delivered an earnings surprise of 9.2%, on average, in the trailing four quarters.

Monster Beverage Corporation Price and EPS Surprise


Monster Beverage Corporation Price and EPS Surprise

Monster Beverage Corporation price-eps-surprise | Monster Beverage Corporation Quote

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.

See 8 breakthrough stocks now>>