Top Coffee Stocks for Q1 2021

The coffee industry is a complex and multilayered one, including everything from producers and distributors to processors, wholesalers, and retailers. Notable names in the coffee industry include Starbucks Corp. (SBUX), J.M. Smucker Co. (SJM), and Restaurant Brands International Inc. (QSR). There is no single sector or ETF for the coffee industry, and coffee-related stocks can be found both in the consumer discretionary and consumer staples sectors. In general, retailers and coffee shops are part of the consumer discretionary group, and producers and packaged food companies are part of the consumer staples group.

These two sectors have performed very differently in the past 12 months. The Consumer Staples Select Sector SPDR ETF (XLP) has underperformed the broader market by posting a 10.5% total return, while the Consumer Discretionary Select Sector SPDR ETF (XLY) has outperformed, with a total return of 31.2%. The Russell 1000 has risen 21.8%, as of December 7, 2020. All statistics in the tables below are as of December 8.

Here are the top 3 coffee stocks with the best value, the fastest growth, and the most momentum.

Best Value Coffee Stocks

These are the coffee stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Source: YCharts

• J.M. Smucker Co.: Consumer staples stock J.M. Smucker manufactures food products for global sale. The company is best known for its fruit spreads, peanut butters, and shortenings and oils. J.M. Smucker announced in early December that it had agreed to sell its Natural Balance premium pet food business to Nexus Capital Management LP for approximately $50 million. The announcement came just days after the company completed its sale of its Crisco oils and shortening business to B&G Foods Inc. (BGS) for $550 million.
• Nestlé SA: Consumer staples stock Nestlé is a Switzerland-based multinational packaged food company offering a wide variety of products ranging from baby food and bottled water to dairy products, frozen food, coffee, and more. The company announced in late November that it had agreed to sell its Yinlu peanut milk and canned rice porridge businesses in China to Food Wise Co. Ltd. The financial terms of the transaction were not disclosed. At the end of October, Nestlé announced that it had acquired Freshly, a U.S.-based meal delivery service, in a deal that values Freshly at $950 million. Freshly is a weekly subscription service that delivers fresh, chef-cooked meals that can be quickly heated in a microwave and served in 3 minutes.
• Restaurant Brands International Inc.: Part of the consumer discretionary sector, Restaurant Brands International is a Canada-based holding company born out of the 2014 merger of Burger King and Tim Hortons. The company also owns Popeyes, the Louisiana fried chicken franchise. Tim Hortons remains one of the largest coffee shop and restaurant chains in Canada.

Fastest Growing Coffee Stocks

These are the coffee stocks with the highest year-over-year (YOY) earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.

Source: YCharts

• Keurig Dr Pepper Inc.: Keurig Dr Pepper is a consumer staples company that makes and distributes non-alcoholic beverage products including coffee. The company serves customers throughout North America.
• J.M. Smucker Co.: See above for company description.
• Dunkin' Brands Group Inc.: Consumer discretionary stock Dunkin' Brands Group franchises quick service restaurants that serve hot and cold coffee, baked goods, and ice cream. The company franchises restaurants under its Dunkin' (formerly "Dunkin' Donuts") and Baskin-Robbins brands. On October 30, Dunkin' Brands agreed to a takeover by Inspire Brands Inc. for approximately $11.3 billion. The transaction is expected to close by the end of the current year. Inspire Brands is a multi-brand restaurant company whose portfolio includes Arby's, Buffalo Wild Wings, SONIC Drive-In, Rusty Taco, and Jimmy John's.

Coffee Stocks with the Most Momentum

These are the coffee stocks that had the highest total return over the last 12 months.

Source: YCharts

• Dunkin' Brands Groups Inc.: See above for company description.
• Starbucks Corp.: Consumer discretionary stock Starbucks retails, roasts, and provides its own brand of specialty coffee. The company operates retail locations throughout the world and sells whole bean coffee through various channels. Starbucks also offers other beverages, complementary food, as well as a focused selection of merchandise at some locations. The company posted a 51.1% decline in net earnings (including non-controlling interests) as revenue fell 8.1% in Q4 of its 2020 fiscal year (FY), which ended September 27, 2020. Starbucks attributed the declines primarily to the impact of the COVID-19 pandemic, including reduced foot traffic and temporary store closures.
• J.M. Smucker Co.: See above for company description.

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