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Why a Few Soft-Drink Stocks Popped Today

By Anders Bylund – Apr 14, 2020 at 4:18PM

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One minor industry player published strong preliminary results for the first quarter, and the market was bubbling upward as a whole.

What happened

Shares of several soft drink companies soared on Tuesday. Cannabis-infused drink specialist New Age Beverages (NBEV 100.00%) led the way with an intraday gain of 44.6%. Energy drink veteran Monster Beverages (MNST 0.37%) topped out at a 7.7% jump, and soda-and-snacks giant PepsiCo (PEP -0.05%) tagged along by rising as much as 5.1%. All three stocks cooled down significantly in the afternoon, again led by New Age Beverages sliding back to a 23% gain as of 3 p.m. EDT.

So what

New Age led the soda-sector surge in terms of market-moving news as well. The company reported preliminary first-quarter results early Tuesday morning, posting revenue of approximately $63 million and gross margin in the "low to mid 60% range." CEO Brent Willis highlighted "accelerated growth" across several target markets, led by China and direct-delivery shipments in the US. The revenue figure topped Wall Street's consensus estimate of roughly $57 million, and the gross margin result is breaking a downward trend over the last few quarters.

Close-up of a bottle of generic cola being poured into a glass filled with ice

Image source: Getty Images.

The other soda specialists didn't have much news of their own, but it's a good sign for the carbonated beverage industry as a whole when one player manages to report solid quarterly results in a highly uncertain market environment. The stock market also rose broadly on Tuesday, lifted by a continued surge of optimism regarding the COVID-19 pandemmic. Pepsi and Monster combined that marketwide groundswell with New Age's good-looking data points.

Now what

The next couple of weeks will show us how consumers in America and around the world really reacted to the COVID-19 crisis. Soft drinks, energy drinks, and cannabis-spiked relaxation drinks all count as comfort food to certain demographics, so I won't be surprised if these companies present strong results all around. The soft-drink shelves at my local supermarket weren't quite as barren as the bathroom tissue and hand sanitizer sections in March and April, but it was a close call.

That marketwide coronavirus optimism may have arrived too early, and even proven survivors like Pepsi will probably drop again when the next correction comes. Just keep some dry powder handy and look out for buying opportunities in the near future. Many investors expect the economic slowdown to go away quickly, and that's just not a realistic assumption. Market timing is usually a fool's errand, but the signs of another big drop occurring sometime in the just-beginning earnings season are too clear to ignore.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Monster Beverage. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Monster Beverage Corporation Stock Quote
Monster Beverage Corporation
MNST
$87.09 (0.37%) $0.32
Pepsico, Inc. Stock Quote
Pepsico, Inc.
PEP
$168.52 (-0.05%) $0.08
NewAge, Inc. Stock Quote
NewAge, Inc.
NBEV
$0.04 (100.00%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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