The beverage industry has historically performed well in warm months. Notably, the Zacks classified Beverage industry (both alcoholic and non-alcoholic) grew 11% so far this year, faring better than the broader S&P 500 market’s 9% gain. More specifically, the Zacks categorized Beverages/Soft Drink industry has returned almost 12.4% year to date, outperforming the broader market’s growth.
One such company cashing in on the positive momentum is Santiago, Chile-based Embotelladora Andina S.A. AKO.B which produces and distributes Coca-Cola products in Chile, Brazil and Argentina. It also produces juices and mineral water, and processes and distributes agricultural products, including canned fruits and tomato products through subsidiaries.
Let us delve deeper into the other factors which make this Zacks Rank #2 (Buy) stock a lucrative pick.
Stock Price Movement: Embotelladora’s shares have gained 25.8% in the last one year, compared to the Zacks categorized Beverages/Soft Drink industry’s 4.3% rise.
Earnings & Revenue Growth: Embotelladora makes a great pick in terms of growth investment. Arguably, nothing is more important than earnings growth as surging profit levels are often an indication of bullish prospects.
Embotelladora has put up a historical EPS growth rate (average trailing 12 months EPS growth rate over the last 3-5 years of actual earnings) of 39.8%, compared with the industry average of 6.5%. The company’s projected EPS growth rate (estimated growth rate for 2017) stands at 36.5%, while the Beverages/Soft Drink industry’s earnings are expected to increase 9.6%.
Notably, the company’s sales growth in fiscal 2017 is projected to be about 12.3%.
For all these reasons, the company currently has a Growth Score of ‘A’ on our style score system that helps us identify potential outperformers.
Valuation Looks Rational: Embotelladora has a Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this perspective. Right now, the company has a P/S ratio of 1.61, which is lower than the S&P 500 average of 3.14. Price/Sales ratio compares a given stock’s price to its total sales, where a lower reading is generally considered better.
Also, the company’s EV/EBITDA ratio stands at 5.81, lower than the Beverages/Soft Drink industry’s average of 18.31. This hints at more upside in the quarters ahead.
Estimate Revisions: Earnings estimates for the current year and the next have gone up 12.6% and 11.5%, respectively, over the past 60 days. The upside in earnings estimates shows unwavering confidence that analysts have in the company. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Embotelladora Andina S.A. Price and Consensus
Embotelladora Andina S.A. Price and Consensus | Embotelladora Andina S.A. Quote
Notably, Embotelladora surpassed estimates in the past three quarters, with an average beat of 537.3%, owing to a stellar third quarter of 2016. Earnings are expected to increase a solid 36.5% in 2017.
VGM Score: Embotelladora has a VGM Score of 'A'. Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics. In fact, our research shows that stocks with VGM Scores of 'A' or 'B' when combined with a Zacks Rank #1 (Strong Buy) or 2 make solid investment choices.
Other Stocks to Consider
Other top-ranked stocks in the broader Consumer Staples sector include Coca Cola Femsa S.A.B. de C.V. KOF, Aramark ARMK and B&G Foods, Inc. BGS. You can see the complete list of today’s Zacks #1 Rank stocks here.
Coca Cola Femsa sports a Zacks Rank #1 and is expected to witness 33.7% growth in 2017 earnings.
Aramark, a Zacks Rank #2 stock, is expected to exhibit about 13% growth in fiscal 2017 earnings.
B&G Foods, also a Zacks Rank #2 company, is expected to witness 7.3% growth in 2017 earnings.
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