No discussion on the top food and beverage stocks is complete without mentioning names like Coca Cola and McDonald’s. The Coca Cola Company is one of the top beverage brands globally. It sells products in a staggering 200 countries. Coca Cola works with 100 bottlers who package the drinks. Coca Cola’s business model is relatively capital-light as it only produces the concentrate needed to manufacture the drinks. Coca Cola’s large size allows it to leverage fixed costs and improve its unit economics. Coca Cola also uses its scale to procure raw materials more efficiently. It is not uncommon to see Coca Cola produce gross margins in excess of 60% year after year.
Coca Cola Reports Q32020 Earnings
Coca Cola reported its Q32020 earnings in late October 2020. Net revenues for the quarter dropped from $9.5 billion in Q32019 to $8.65 billion in Q32020. Operating income was down from $2.49 billion in the same quarter the prior year to $2.29 billion in the third quarter of 2020. Lastly, net income per share came in at $0.4, a drop from $0.61 per share in the third quarter of 2019.
According to company CEO James Quincey, “From the 25% volume decline that we saw in April, the mid-single-digit declines through the summer and the low single-digit decline since September, our volume trends have continued to improve. Much of the sequential improvement has been driven by the away-from-home channels which represent roughly half of our business globally.”
If you are looking to play the vaccination drive and the subsequent opening up of the economy and want to take positions in beverage stocks, then you may want to consider Coca Cola and its biggest rival PepsiCo. PepsiCo’s stock closed at $146 on 18th December, having bounced back 40% since the March market crash. PepsiCo’s stock currently trades at a 2.78% dividend yield. Meanwhile, Coca Cola’s stock closed at $53 on 18th December, having also bounced back by about 43% since hitting lows in March. Coca Cola’s stock trades at a 3.05% dividend yield.