Given the stable demand for products in the food and beverage industry, coupled with the rising disposable income of individuals and rapid technological advancements, the food and beverage industry is well-positioned for robust profitability and expansion.

Given the encouraging background, sound food and beverage stocks PepsiCo, Inc. (PEP), Sysco Corporation (SYY), and US Foods Holding Corp. (USFD) could be ideal portfolio additions for substantial returns.

The food & beverage market is thriving currently, as observed by the evolving consumer preferences and digital transformation. Consumers are leaning towards health-conscious choices and adopting low-sugar, low-calorie, and plant-based diets, insisting companies expand their variety and alternates.

Also, rapid digitalization and technological advancements, which are transforming aspects like online ordering systems, payments, diet plans, and helping farmers with operational efficiency, are accelerating the food market’s growth.

The global food and beverages market is projected to reach around $7.40 trillion in 2025 and is poised to exhibit growth at a CAGR of 6.2%, resulting in a market value of $9.42 trillion by 2029. The strong market growth is propelled by growing internet penetration, increasing smartphone users, rapid urbanization, and rising disposable income.

Also, the increasing number of environmentally conscious consumers is driving sustainability and environmental protection practices across the food and beverages market, resulting in environmentally friendly packaging and attempts towards reducing food wastage.

Considering the industry’s strong prospects, investing in fundamentally sound food and beverage stocks like PEP, SYY, and USFD may be prudent.

PepsiCo, Inc. (PEP)

PEP manufactures, markets, distributes, and sells various beverages and convenient foods worldwide. It operates through seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East, and South Asia; and Asia Pacific, Australia and New Zealand and China Region.

On November 22, 2024, PEP acquired the remaining 50% interest in Sabra Dipping Company, LLC and PepsiCo-Strauss Fresh Dips & Spreads International GmbH. With the agreement, PEP became the sole owner of the companies. The acquisition expanded PEP’s positive choice portfolio.

It will also enable the company to accelerate innovation in refrigerated fresh dips and spreads to meet the surging consumer demand.

Also, on October 1, 2024, PEP entered a definitive agreement to acquire Garza Food Ventures LLC, dba Siete Foods, for $1.2 billion. The addition of an authentic Mexican-American brand through this strategic acquisition complements PEP’s portfolio. It will expand the company’s operations and allow it to build a multicultural portfolio.

PEP reported net revenue of $23.32 billion during the third quarter that ended September 7, 2024. Its gross profit grew 1.1% from the year-ago value to $12.92 billion. The company’s net income attributable to PepsiCo amounted to $2.93 billion and $2.13 per common share for the period.

In addition, as of September 7, 2024, the company’s cash and cash equivalents and total assets stood at $7.31 billion and $100.51 billion.

Street expects PEP’s revenue and EPS for the fourth quarter (ended December 2024) to grow marginally and 9.3% year-over-year to $27.97 billion and $1.95, respectively. Moreover, the company topped the consensus EPS estimate in three of the trailing four quarters.

The stock has declined 9.6% over the past month to close the last trading session at $142.64.

PEP’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has an A grade for Quality and a B grade for Growth. Within the Beverages industry, PEP is ranked #10 among 31 stocks.

Click here to access additional ratings of PEP for Value, Momentum, Stability, and Sentiment.

Sysco Corporation (SYY)

SYY engages in the marketing and distribution of various food and related products to the food service or food-away-from-home industry internationally. The company operates in U.S. Foodservice Operations; International Foodservice Operations; SYGMA; and Other segments.

On December 18, SYY announced a new partnership with Square to assist restaurants of all sizes to succeed and work smarter by leveraging powerful technology. The collaboration will allow SYY’s customers to receive a compelling processing fee rebate and hardware credits when enrolling through Sysco.

On October 14, SYY introduced 19 innovative, labor-saving concepts nationwide, made available exclusively for SYY customers through its Cutting Edge Solutions platform. The offered solutions enhanced efficiency and increased creativity.

For the first quarter that ended September 28, 2024, SYY’s sales grew 4.4% year-over-year to $20.48 billion. The company’s non-GAAP gross profit increased 2.7% from the year-ago value to $3.75 billion. Its non-GAAP operating income came in at $873 million, up 2.2% from the previous year’s quarter.

Furthermore, the company’s net earnings stood at $540 million and $1.09 per share for the quarter. Also, its adjusted EBITDA increased 4.4% from the prior-year quarter to $1.07 billion.

Street expects SYY’s revenue for the second quarter (ended December 2024) to increase 4.3% year-over-year to $20.11 billion. The company’s EPS for the same period is expected to grow 3.7% from the prior year’s quarter to $0.92. Moreover, it has topped the consensus EPS estimates in three of the trailing four quarters.

Over the past six months, SYY’s stock has gained 5.7% to close the last trading session at $73.59.

SYY’s POWR Ratings reflect bright prospects. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.

SYY has a B grade for Value and Stability. It is ranked #11 among 75 stocks within the B-rated Food Makers industry.

To see the other SYY ratings for Growth, Momentum, Quality, and Sentiment, click here.

US Foods Holding Corp. (USFD)

USFD engages in the marketing, selling, and distributing of fresh, frozen, and dry food and non-food products to food service customers. The company’s customers include independently owned single and multi-unit restaurants, regional concepts, national restaurant chains, hospitals, nursing homes, hotels, and motels.

On January 13, USFD reaffirmed its fiscal year 2024 guidance announced earlier. According to the outlook, USFD expects net sales of $37.70 billion to $38 billion. The company’s adjusted EBITDA is expected between $1.72 billion and $1.74 billion, and its adjusted EPS is set to be $3.05 – $3.15.

During the third quarter that ended September 28, 2024, USFD’s net sales increased 6.8% year-over-year to $9.73 billion. Its gross profit grew 8.1% from the year-ago value to $1.67 billion. Also, the company’s operating income of $279 million indicates growth of 21.3% from the prior-year period.

Furthermore, the company’s net income was $148 million or $0.61 per share, up 55.8% and 60.5% from the prior year’s quarter, respectively.

For the fourth quarter ended December 2024, the company’s revenue is expected to grow 6.2% year-over-year to $9.49 billion. Similarly, analysts expect USFD’s EPS for the same quarter to increase 25.4% year-over-year to $0.80. Similarly, the company topped the consensus revenue estimates in all of the trailing four quarters.

Shares of USFD have surged 34.1% over the past six months and 45% over the past year to close the last trading session at $67.35.

USFD’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

USFD has a B grade for Stability, Sentiment, Growth, and Value. It is ranked #4 out of 75 stocks in the B-rated Food Makers industry.

In addition to the POWR Ratings we’ve stated above, we also have USFD ratings for Momentum and Quality. Get all USFD ratings here.

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PEP shares rose $0.21 (+0.15%) in after-hours trading Monday. Year-to-date, PEP has declined -4.97%, versus a -0.80% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...

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