Goldman Positive on Beverage Space; Highlights Hansen Natural, Coca-Cola

Goldman Sachs is out positive on the beverage space, saying the volume declines in key beverage segments, namely soda and beer have not been as dramatic as expected despite aggressive pricing taken to cover raw material inflation.

The cost outlook remains challenging, with spot prices of key commodities like aluminum and corn still at elevated levels but emerging market exposure should boost results for companies with operations outside the US.

GSCO highlights Coca-Cola (NYSE:KO) and Hansen Natural (NASDAQ:HANS) as their favorite stocks to own into the earnings report and would advise investors away from the bottlers and Anheuser-Busch (NYSE:BUD). They are ahead of consensus forecasts for both HANS and KO, and see opportunity for upward earnings revisions based on strong profit results in the quarter and an improved full-year outlook.

For KO, continued strength in emerging markets, developed market recovery, and foreign currency could drive another quarter of solid concentrate business profit growth. For HANS, they expect solid continued growth for the energy drinks category and share gains by Hansen's portfolio to drive better-than-expected sales growth, albeit with some partially offsetting margin contraction. A 2H profit acceleration could be in store as Hansen benefits from price increases, the distributor transition, and new products.

Notablecalls: It's fairly quiet out there today with KO's possible deal with private equity players to buy Cadbury's (NYSE: CSG) Snapple and Mott's brands highlighted as big news. This, coupled with GSCO's positive call ahead of the earnings report, may create some interest. HANS is my favorite of the two.

Note that scanner data on HANS been pretty strong.

HANS 1-yr chart:

KO 1-yr chart: