Top 3 Beer Stocks for 2024

As the days get warmer and the stock market booms, some investors may be looking for a place to cool off. What better place to refresh and find investment ideas than a beverage cooler stocked with not only your favorite beers but also “hot tips” on the next big investment beer stocks?

The S&P 500 and Nasdaq indexes have hit record highs this year, up about 15% and more than 20%, respectively, year to date as of June 28. Beer stocks may feel especially refreshing for investors looking for hidden gems in a sea of ​​overvalued stocks.

The following brewers in the Consumer Staples sector have demonstrated consistent performance during market downturns. These blue-chip stocks have earned leading positions in highly consolidated markets, offering a reliable hedge against economic uncertainty.

Anheuser-Busch InBev BUD Molson Coors Beverage Company TAP Constellation Brands STZ Anheuser-Busch InBev BUD

Analyst: Ioannis Pontikis, CFA

Anheuser-Busch InBev, maker of the world-famous Budweiser beer, is the world's largest brewer. According to Euromonitor, the company's portfolio includes six of the top 10 beer brands in the world by volume, with 23 of those brands achieving retail sales of over $1 billion each. The company also owns 62% of its Latin American subsidiary, AnBev.

AB InBev's strategy is to acquire brands with high growth potential, expand their distribution, and reduce operating costs relentlessly. “The acquisitions have created a giant with global scale and regional density,” says a Morningstar stock report. The beer giant has one of the strongest cost advantages and is one of the most efficient operators in Morningstar's consumer defense coverage. AB InBev's significant fixed cost leverage and sourcing pricing power are supported by its global scale and its monopoly positions in Latin America and Africa.

“This is reflected in the company's excess return on invested capital, best-in-class operating and cash cycles, asset turns, and working capital management,” argues Morningstar director of equity analyst Ioannis Pontikis, who rates the company's shares at $90.

The company has particularly attractive growth prospects in Latin America and Asia, which account for nearly two-thirds of its consolidated EBIT. [in these markets] “The company is upgrading to premium global brands and ABI has a strong portfolio that includes strong brands in the premium segment such as Budweiser, Corona and Stella Artois,” Pontikis noted.

Molson Coors Beverage Company TAP

Analyst: Dan Su, CFA

Molson Coors is a Canadian-American multinational brewer headquartered in Chicago that owns popular brands such as Miller, Coors, Blue Moon, and Carling. It is the second largest beer manufacturer in the United States, Canada, and the United Kingdom, both by value and volume. Its largest market, North America, accounts for over 80% of its total revenue.

Under Chief Executive Gavin Hattersley, Molson Coors has shifted its strategy to focus on expanding its premium beer business and cutting investments in its lower-margin economy division.

“We believe the new strategy steers the company in the right direction,” Morningstar's stock report said. “We also appreciate the technology enhancements being implemented across the supply chain, which should facilitate data-driven planning and better utilization of production capacity.”

Additionally, the company is allocating significantly increased funding to modernize its brewing and distribution capabilities, as well as to research and marketing of premium malt beverages.

“These investments will be partially funded by cost savings totaling $600 million between 2020 and 2022,” wrote Dan Su, director of equity analysts at Morningstar, who estimates the stock's fair value at $70.

Management plans to further streamline the company's vast brewing and packaging operations into five major U.S. locations over the next few years.

Although Molson Coors is aggressively pursuing premiumization, it “faces stiff competition in the premium segment from well-established players such as Constellation and AB InBev, which enjoy strong brand equity and distributor partnerships,” Su warned.

Constellation Brands STZ

Analyst: Dan Su, CFA

Constellation Brands, the largest supplier of alcoholic beverages in the beer, wine and spirits categories in the United States, generates 80% of its sales from importing Mexican beer, including its top-selling Modelo and Corona brands. The company's sales in international markets are small because its exclusivity rights to Mexican beer brands are only valid in the United States.

Constellation also holds a 36% economic interest in Canopy Growth Corp., a Canadian medical and recreational cannabis producer.

The beer giant has acquired exclusive U.S. distribution rights for Mexican brands Modelo and Corona, strengthening its dominant market position in the premium import segment.

“Over the past decade, the brewer has implemented a series of smart advertising campaigns and rigorous quality control in its brewing operations that we believe have supported and strengthened the popularity and premium position of its two flagship brands,” Morningstar's stock report said.

As the overall U.S. beer market has remained flat for years, Constellation has capitalized on the premiumization trend to drive high single-digit volume growth.

“We expect Constellation's beer volume growth to continue at a strong clip over the next few years, driven by consumer loyalty, the social value associated with a premium brand, and a robust innovation pipeline,” said Su, who recently raised his price target on the company's shares to $280 from $275.

The brewer's broad-based economic advantage is built on a portfolio of top-selling Mexican beer brands with strong brand equity and close distributor partnerships.

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