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4 Soda & Beverage Stocks to Gain From Aluminum Tariff Lift

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President Donald Trump’s resolution to remove aluminum tariffs on the imported metal could help U.S. soda and beverages industry regain its fizz. Therefore, investors can take note of a few stocks from the industry in a bid to bank on the gains ahead.

U.S.-Mexico-Canada Finally Reach a Deal

Last week, Trump initiated steps to ease trade tensions between the United States, Canada and Mexico by lifting import taxes on Canadian and Mexican steel and aluminum.

The move was promptly echoed by the Canadian and Mexican governments, announcing the removal of retaliatory tariffs on a variety of American goods, from metals to food. The tariffs were a key hurdle to the approval of the U.S.-Mexico-Canada Agreement (USMCA) trade deal signed in 2018. So, it could now be easier for the three governments to ratify the deal.

United State’s soda and beverages industry, in particular, stands to gain from the removal of aluminum tariffs since it predominantly uses imported aluminum for manufacturing the cans.

Aluminum Tariffs Impacted U.S. Soda & Beverages Industry

Since soda and beverages companies manufacture a large number of products packaged in aluminum bottles and cans, the brunt of 10% tax on imported aluminum was felt by them when it came into effect last year. Manufacturing cost for canned items rose along with the cost of cans used for packaging drinks, which affected sales of many beverage companies.

This led to companies trying to absorb the imported aluminum price hike through various means. These included layoffs, postponing innovation and expansion, and ultimately moving the price rise onto consumers.

The increased price of beverages in aluminum cans made them not only unattractive from an economic viewpoint but also gave other products, including glass and plastic packaging, a competitive edge since these aren’t subject to tariffs. In addition, foreign competitors also got the benefit of not paying a falsely inflated raw cost.

However, now that the tariffs are off the table, the scenario looks promising for employment, introduction of innovative techniques and profitability for soda and beverage companies.

According to Katherine Lugar, president and CEO of American Beverage Association, the U.S. beverages industry supports about 253,000 jobs, contributes $182 billion in direct economic impact and offers $19.8 billion in benefits and wages.

Given the bright scope ahead for this industry, it would be prudent to keep an eye on some beverage stocks for your portfolio.

Our Choices

We have selected four stocks that carry a Zacks Rank #2 (Buy) or 3 (Hold) and could gain big from the aluminum tariff lift. In addition, all these beverage companies have beaten their respective sub-industries on a year-to-date basis or over a one-year period.

PepsiCo, Inc. (PEP - Free Report) is a food and beverage company. The company's North America Beverages segment offers beverage concentrates, fountain syrups and finished goods under the brand names of Aquafina, Diet Mountain Dew, Diet Pepsi, Gatorade, Mountain Dew and Pepsi etc among other beverages.

The company carries a Zacks Rank #2 and its Zacks Consensus Estimate for current-year earnings has risen 0.2% in the past 60 days. The company’s stock price has outperformed the Zacks Beverages – Soft Drinks Market on a year-to-date basis (+17.6% vs +11.8%). You can see the complete list of today’s Zacks #1 Rank stocks here.

Anheuser-Busch InBev SA/NV (BUD - Free Report) is a brewing company that offers a portfolio of about 500 beer brands that include Budweiser, Corona and Stella Artois.

The company carries a Zacks Rank #3 and its Zacks Consensus Estimate for current-year earnings has risen 4.4% in the past 60 days. The company’s stock price has outperformed the Zacks Beverages - Alcoholic Market on a year-to-date basis (+25.1% vs +18.9%).

Monster Beverage Corporation (MNST - Free Report) is a manufacturer and marketer of energy drink beverages and concentrates in the United States and globally. Monster Beverage Corporation sells its products under the brand manes of Monster Energy, Monster Energy Ultra, Monster Rehab, Monster MAXX, Java Monster, Muscle Monster and Espresso Monster among various others.

The company carries a Zacks Rank #3 and its Zacks Consensus Estimate for current-year earnings has risen 1.5% in the past 60 days. The company’s stock price has outperformed the Zacks Beverages – Soft Drinks Market on a year-to-date basis (+28.4% vs +11.8%).

The Coca-Cola Company (KO - Free Report) is a beverage company that mostly manufactures and markets a variety of nonalcoholic beverages globally. Some of the company’s popular brands include Coca-Cola, Diet Coke/Coca-Cola Light, Coca-Cola Zero Sugar, Fanta, Schweppes, Sprite and Thums Up etc.

The company carries a Zacks Rank #3 and its Zacks Consensus Estimate for current-year earnings has risen 0.5% in the past 30 days. The company’s stock price has outperformed the Zacks Beverages – Soft Drinks Market over the past one-year period (+17.6% vs +8.0%).

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