National Beverage Corp. (Nasdaq:FIZZ), the soft-drink company with brands such as Faygo and Shasta, reported earnings for the quarter and its fiscal year ended May 1, 2010. The company posted healthy increases in sales and earnings for both the quarter and the year.

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Fiscal 2010 And Fourth-Quarter Results
Sales increased from $575 million in fiscal 2009 to $593 million in fiscal 2010. Net income rose to $32.9 million, or 71 cents a share, from $24.7 million, or 54 cents a share a year ago. For the fourth quarter, sales increased slightly from $148.4 million to $149.6 million, with income at $9.2 million, or 20 cents a share, up from $6.8 million or 15 cents a share.

The company has set a goal for EBITDA/Sales of 11%, and grew cash to $68.6 million. Overall National Beverage posted strong results, though the revenue gains tapered off in the quarter, but the impressive profit increases continued.

The Beverage Biz
Although beverage companies belong to the classic defensive category of stocks along with food stocks and consumer staples, that doesn't mean success is automatic. Competition in the industry is tight. Back in January, Jim Cramer wrote of his preference for PepsiCo (NYSE:PEP) over National Beverage stock, citing the difficult carbonated drink business climate at the time. Cramer preferred Pepsi's diversified product mix and regular dividend to National Beverage's special dividends it doles out from its cash generation.

National Beverage's business and prospects have picked up since then, so investors might want to take a closer look at the company now. While it's true the company still features its popular value sodas, and its product mix is nothing on the order of Pepsi's, National has moved into the energy drink and nutritional supplement arena, which should give it some added versatility with the potential appeal of healthier drinks.

Other Strong Performers
The beverage business remains highly competitive, with other strong performers. Dr. Pepper Snapple (NYSE:DPS) significantly hiked its dividend in the spring after only two quarters of payouts. Then of course there is Coca Cola (NYSE:KO) to contend with. The number one non-alcoholic beverage company, which is due to report earnings, continues to solidify its position with its powerful brand, marketing and lobbying efforts.

National Beverage should be thought of more along the lines of a smaller version of a Hansen Natural (Nasdaq:HANS), with its potent free-cash flow producing revenue engine and its more eclectic product line.

National Beverage Stock
The stock was recently cited as having strong continued growth prospects, along with insider ownership of nearly 78% of the company, and increased institutional buying. Estimates for National Beverage show projected earnings growth in the double digits for the next two years. In the competitive drink industry even through the recession, National has hung in there and its business is gathering steam, (or fizz, maybe). With its smaller size, it has some nimbleness to speed up its growth.

The stock right now trades near its 52-week high and trades at a PE over 20. For growth investors, it would be prudent to wait another quarter or so to make sure the earnings momentum is sustained in a still difficult economy. Then the stock would be worth capturing on any significant pullback in price. (Read Momentum Trading With Discipline to learn more about using momentum in your strategy.)

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Tickers in this Article: FIZZ, PEP, DPS, KO, HANS

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