Please ensure Javascript is enabled for purposes of website accessibility

Why a Few Soft-Drink Stocks Popped Today

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.