While most people savor a cold soda on a hot day, investors are sure to point out that every day is perfect for owning stock in these companies. Led by internationally recognized manufacturers like the Coca-Cola Company (NYSE:KO) and PepsiCo (NYSE:PEP), these companies have been largely successful at not only manufacturing tasty beverages, but also for being excellent investments. In addition to Coke and Pepsi, some of the other top names in the industry are Dr Pepper Snapple Group (NYSE:DPS), National Beverage Corp (FIZ) and SodaStream International Ltd (NASDAQ:SODA).
The Coca-Cola Company
Coca-Cola was the top global brand in 2011. This recognition is said to have brand value of nearly $72 billion for the $155 billion company. Currently trading at $68 per share, it is close to breaking through the top of its 52-week range that sits at $ 61.29 - $71.77. With a one-year target of nearly $75 and a dividend of $1.88 (for a yield of 2.8%), Coca-Cola continues to be "the real thing" when it comes to soft drink stocks.
Trending upward and once again climbing above its 50-day and 200-day moving averages, the stock is primed for another great year. Coming off a strong 45% quarterly revenue growth in 2011, Coke has a price to earnings ratio of 12.5 and a quarterly earnings growth of nearly 8.5%, suggesting that things really do go better with Coke.
Much like Coke, Pepsi is a dominant brand in the marketplace. Pepsi ranks at #22 on the same Interbrand list, with an estimated brand worth of $14.6 billion. The $104 billion company has consistently challenged Coke for the industry lead, and it is a strong investment option as well. Trading around $66.50 per share, PepsiCo has a 52-week range of $58.50 - $71.89, and a one-year target of $69.75. The company pays a very nice $2.06 dividend that results in a 3.1% yield.
PepsiCo is a very good "anti-Coke" stock, much in the same way that people who don't want to own Microsoft (NASDAQ:MSFT) will gravitate to purchasing shares of Apple (NASDAQ:AAPL). Either of the soft drink giants is a very favorable investment. PepsiCo has gained a reputation as an "all-inclusive stock"; it has a wide moat (dominant position in the soda market), it has growing earnings (4.1% for 2011) and its payout ratio of 50% helps to ensure that it can comfortably continue dolling out very nice dividends. PepsiCo is well-positioned to succeed, and investors should be eager to consider purchasing its stock.
Dr Pepper Snapple Group
While it is Dr Pepper, 7-Up and other soft drinks that put the fizz in the company, Snapple is also a key component in putting the sizzle in the stock. Taking on the heavyweights in Coke and Pepsi, the soft drink lineup of Dr Pepper has allowed it to compete against its rivals, while unique beverage flavors of Snapple have created a powerful compliment that allows the company to battle against companies like Monster Beverage Corporation (HANS). This balance has Dr Pepper Snapple trading at a share price of $38.50, close to the midpoint of its 52-week range ($33.68 - $43.13), and moving toward a one-year target of $40.70. In addition, the company pays an annual dividend of $1.28, for a yield of 3.3%.
A stable company, Dr Pepper Snapple is 30% less volatile than the market as a whole. With price to earnings ratio of almost 16 trailing and over 13 looking forward, the company appears to be positioned well against any negative movement in the market. In addition, its 7% gain in quarterly earnings suggests continued stability in share price, while its reasonable payout ratio of 46% indicates the company will continue paying out its impressive dividends. Dr Pepper Snapple Group is another wonderful option to consider buying.
National Beverage is a diversified company, offering water, juices and energy drinks to go along with the soft drinks it sells under the Shasta and Faygo brands. This Fort Lauderdale, Fla.-based company has a market capitalization of over $780 million and a stock price of $17 per share, which is close to the top of its 52-week range of $12.30 to $17.76. The one-year target estimate of the company is just below its current rate.
While National Beverage is no match for the size of its rivals, the company continues to carve its niche in the soft drink market. With a solid 9% gain in quarterly earnings and a price to earnings ratio of 18, the company looks poised for continued success. Although some analysts are concerned by National Beverage's earnings, it has a very good free cash flow and its revenue growth of 4.5% indicates a positive outlook for the future. Although it does not have the momentum of its competitors, this is still a nice option to consider.
SodaStream is a unique company in the soft drink market. Although it does sell beverages under the SodaStream and Soda-Club brand names, the company is best known for its home beverage carbonation systems. Trading at around $40 per share, the company has a capitalization of $810 million; its 52-week range is $27.60 to $79.72, and it has a one-year target of $46.43, which suggests a potential gain of 15% in share price. The company does not pay a dividend.
Known for its beverage systems, SodaStream is less of a competitor with the big companies, more closely linked with Electro Scientific Industries (NASDAQ:ESIO), a company with a rival personal beverage maker. Although much of SodaStream's momentum was attributed to its economic moat; that changed recently when Wal-Mart (NYSE:WMT) announced that it would begin offering the Esio beverage system in its stores. This news has undermined much of the excitement over SodaStream's 275% quarterly earnings growth. While this news is not a death knell by any means, investors may want to monitor the short-term situation before entering into any new positions with the company.
Popping the Top on Soda Stocks
The soft drink industry has been a very lucrative business sector; it has also been a very profitable investment. Many people have done well in this area, and indications are that many opportunities still exist. The Coca-Cola Company, PepsiCo, Dr Pepper Snapple Group and National Beverage Corp all seem to be very promising options, while investors may want to do some additional research before making any moves on SodaStream International Ltd.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.