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MNST vs KDP: Which Stock is Better Placed at the Moment?

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The soft drinks industry has been witnessing evolving trends on consumers’ changing preferences for a healthy lifestyle. Consumption patterns are being dictated by a focus on personal well-being and healthy eating habits, which are making way for increased use of natural, plant-based and organic ingredients in food and beverages.

As a result, beverage companies are leaving no stone unturned to meet consumers’ needs by introducing innovative products, including functional drinks, ready-to-drink variations and naturally prepared drinking options. Also, customers are now willing to pay more for healthier, lower-sugar alternatives in soft drinks.

Soft drinks with no preservatives or added colors, low sugar content, and no artificial sweeteners are gaining popularity. Drinks with plant extracts, natural fruit flavors and not-from-concentrate juices are replacing the not-so-healthy counterparts. Also, the demand for flavored water, vitamin water and tea in different variations is on the rise. Water products enriched with natural ingredients and refreshing flavors are highly popular and are likely to witness the same in the future.

Americans have always loved coffee, but with the sudden obsession with being healthy, the coffee craze has reached new heights. Cold brew is a new favorite among millennials. The introduction of antioxidants and other health-boosting nutrients in coffee has also been gaining popularity lately. The gradual opening of the away-from-home channel has been boosting growth in ready-to-drink coffee, particularly instant and brewed coffee, as well as canned and bottled coffees.

Although rising inflation stemming from elevated raw material prices and high distribution costs remain headwinds, the global soft drinks industry remains on track with product innovation, as well as affordable small-format pack sizes.

Driven by the above-mentioned factors, the global soft drinks market is anticipated to reach $1.6 billion by the end of 2027.

Given this encouraging backdrop, it is not a bad idea to undertake a comparative analysis of two prominent beverage players — Monster Beverages MNST and Keurig Dr Pepper KDP. Let us delve deeper into factors beyond rank since both companies currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings History & Projected Growth

Considering a comprehensive earnings history, Monster and Keurig delivered earnings surprises of 0.1% and 0.7% on average, respectively, in the trailing four quarters. Meanwhile, MNST and KDP’s long-term earnings growth rates are projected to be 15.7% and 6.8%, respectively.

Price Performance

Monster & Keurig’s shares have gained 4.4% and 3.3%, respectively, in the past year. However, both companies have underperformed the broader industry’s 9.5% growth but came ahead of the 12.5% decline recorded by the S&P 500 index.

 

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Zacks Investment Research


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Valuation

MNST currently has a forward P/E ratio of 35.28, while KDP has a forward P/E of 21.33. Another notable valuation metric for MNST is its P/B ratio of 7.30. In comparison, KDP has a P/B of 2.01. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities.

These metrics and several others help MNST earn a Momentum Score of B, while KDP has a Momentum Score of D.

Our Take

Our comparative analysis shows that Keurig has the edge over Monster in terms of key metrics. Meanwhile, Monster scores higher only on the valuation front, which suggests more upside left for the stock. Both MNST and KDP are impressive stocks, but based on these valuation figures, we feel that KDP is the superior value option right now.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Monster Beverage Corporation (MNST) : Free Stock Analysis Report
 
Keurig Dr Pepper, Inc (KDP) : Free Stock Analysis Report
 
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