Top Coffee Stocks for Q4 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 differently in the past 12 months, though both have underperformed the broader market. The Consumer Staples Select Sector SPDR ETF (XLP) has posted a 16.2% total return, while the Consumer Discretionary Select Sector SPDR ETF (XLY) has provided a total return of 27.8%. The Russell 1000 has risen 39.0%. These market performance numbers and all statistics in the tables below are as of Sept. 8, 2021.

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.: J.M. Smucker, a consumer staples stock, manufactures food products for global sale. The company is best known for its fruit spreads, peanut butters, and shortenings and oils. J.M. Smucker's Q1 FY 2022 ended on July 31, 2021. For that quarter, the company reported that net income plunged 35% while net sales fell by about 6% year-over-year (YOY). These figures were negatively impacted by the company's divestiture of its Crisco business in December 2020 and of its Natural Balance business in Jan. 2021.
• 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. In late August, the company completed the acquisition of the core brands of The Bountiful Company, including Nature’s Bounty, Solgar, Puritan’s Pride, Sundown, and other brands. The $5.8-billion acquisition was first announced in April 2021.
• 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. For its Q2 2021, Restaurant Brands International net income attributable to common shareholders rose 144% as revenue climbed by 37.2% YOY. The company attributed the growth to increased sales of popular menu items, rapid adoption of digital channels by customers, and a surge in new restaurant openings.

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 YOY percentage revenue growth and their 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 or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.

Source: YCharts

• Restaurant Brands International Inc.: See above for company description.
• Starbucks Corp.: Starbucks is a consumer discretionary stock. It retails, roasts, and sells 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, food, and a focused selection of merchandise. Starbucks does not have an entry in the EPS growth section of the table above because it went from negative to positive EPS for the period in question, making such a calculation impossible.
• 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.

Coffee Stocks with the Most Momentum

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

Source: YCharts

• Starbucks Corp.: See above for company description.
• Keurig Dr. Pepper Inc.: See above for company description.
• Restaurant Brands International Inc.: See above for company description.

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