Bernstein has singled out preferred stocks in the European non-alcoholic beverages sector, prioritizing companies it believes offer clearer paths to earnings growth and the potential for stock re-rating. The broker’s selection emphasizes different fundamental drivers at work across the industry - from market exposure and margin recovery to proprietary brand expansion and cost efficiency measures.
Coca-Cola HBC (CCH) - A growth-oriented pick
Bernstein positions Coca-Cola HBC as a primary growth play. The research note highlights the company's exposure to faster-growing emerging markets and a trajectory of improving margins as the main supports for robust earnings expansion. The broker expects steady revenue momentum combined with operational leverage to translate into double-digit EPS growth. At the same time, Bernstein explicitly acknowledges the presence of currency risks and geopolitical sensitivities that could affect near-term performance. Despite those cautions, the firm views Coca-Cola HBC’s strategic positioning and long-term growth profile as reasons to treat it as a core outperformer within the sector.
Royal Unibrew (RBREW) - A turnaround with upside
Royal Unibrew is characterized by Bernstein as a high-upside turnaround candidate. According to the brokerage, recent weakness in the company's share price - attributed to concerns around future contract losses - has created what it considers an attractive entry point. Bernstein lays out scope for margin recovery through cost efficiencies and the expansion of higher-margin proprietary brands as mechanisms to help offset longer-term headwinds. The note emphasizes that multiple value-creation levers exist for RBREW, supporting the view that the stock could re-rate materially, even as the brokerage notes there remains near-term uncertainty.
Takeaway
Bernstein’s guidance for the sector focuses on names where distinct fundamental pathways support earnings upside: market exposure and operational leverage in the case of Coca-Cola HBC, and margin repair plus brand strategy for Royal Unibrew. While the research is constructive on both names, it also flags specific risks that could temper short-term outcomes.
Key points
- Coca-Cola HBC is highlighted as a favored growth stock due to emerging market exposure and improving margins supporting double-digit EPS growth.
- Royal Unibrew is presented as a turnaround opportunity following share price weakness tied to future contract loss concerns, with margin recovery and higher-margin brands cited as value levers.
- Sectors affected include consumer staples and equities focused on non-alcoholic beverages, with potential implications for investors weighing growth versus turnaround risk profiles.
Risks and uncertainties
- Currency volatility and geopolitical sensitivities could affect earnings and valuation for companies with significant emerging market exposure - impacting consumer staples and regional equity markets.
- Future contract losses cited in relation to Royal Unibrew have driven recent share price weakness and create short-term uncertainty for the company’s revenue and margin outlook.
- Near-term market re-rating depends on successful margin recovery and execution of brand and cost initiatives, which remain uncertain.