Top Coffee Stocks for Q1 2022

The coffee industry is complex and multilayered, including everything from producers and distributors to processors, wholesalers, and retailers. Notable names in the coffee industry include Starbucks Corp. (SBUX), The J.M. Smucker Co. (SJM), and Restaurant Brands International Inc. (QSR).

There is no single sector or exchange-traded fund (ETF) for the coffee industry, and coffee-related stocks can be found in both 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.

The consumer staples sector has underperformed the consumer discretionary sector, which has slightly underperformed the broader market. The Consumer Staples Select Sector SPDR ETF (XLP) has posted a 19.2% total return, while the Consumer Discretionary Select Sector SPDR ETF (XLY) has provided a total return of 21.4%. By comparison, the Russell 1000 has risen 21.9%.

Here are the top three coffee stocks with the best value, the fastest growth, and the most momentum. The market performance numbers above and all statistics in the tables below are as of Jan. 7, 2022.

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 that you’re paying less for each dollar of profit generated.

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• The J.M. Smucker Co.: J.M. Smucker, a consumer staples stock, manufactures food products for global sale. It is best known for its fruit spreads, peanut butters, and shortenings and oils. In mid-December 2021, the company announced that it has agreed to sell its natural and organic beverage and grains businesses to Nexus Capital Management LP for approximately $110 million. The transaction is expected to close in the third quarter (Q3) of the company’s 2022 fiscal year (FY). Two weeks earlier, J.M. Smucker announced that it had sold its private label dry pet food business to Diamond Pet Foods Inc. for approximately $33 million.
  
• 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, one of the largest coffee shop and restaurant chains in Canada. The company also owns Popeyes, the Louisiana fried chicken franchise. In mid-December 2021, the company announced that it has completed its acquisition of Firehouse Restaurant Group Inc., a restaurant chain doing business under the name Firehouse Subs, for $1.0 billion.
• Starbucks Corp.: Starbucks is a consumer discretionary stock. It retails, roasts, and sells its own brand of specialty coffee. The company operates retail locations around the world and sells whole-bean coffee through various channels. Starbucks also offers other beverages, food, and a focused selection of merchandise. On Jan. 10, 2022, the National Labor Relations Board (NLRB) approved a union vote conducted the previous month by employees of a Starbucks location in Buffalo, N.Y. The approval of the vote means that the store becomes the second Starbucks location in the United States to unionize. Starbucks has 10 days to challenge the NLRB decision.

Fastest-Growing Coffee Stocks

These are the top coffee stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

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• Starbucks Corp.: See above for company description.
• Restaurant Brands International Inc.: See above for company description.
• Keurig Dr Pepper Inc.: Keurig Dr Pepper is a consumer staples company that makes and distributes nonalcoholic beverage products, including coffee. The company serves customers throughout North America.

Coffee Stocks with the Most Momentum

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

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• The J.M. Smucker Co.: See above for company description.
• Nestlé S.A.: 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. At the end of December 2021, the company announced that it has completed the share repurchase program that began on Jan. 3, 2020. It said that it would start its new, previously announced, share buyback program on Jan. 3, 2022, under which it is authorized to repurchase up to CHF 20 billion ($22 billion) worth of shares by the end of 2024.
• Keurig Dr Pepper Inc.: See above for company description.

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