As the global beverage market is met with rapidly evolving consumer shopping habits and preferences, many industry leaders have initiated large-scale restructurings to diversify their businesses away from carbonated drinks and step up their branding efforts.

In a research note to clients Thursday, Credit Suisse analyst Laurent Grandet highlighted beverage players Monster Beverage Corp. (MNST), PepsiCo Inc. (PEP) and Dr Pepper Snapple Group Inc. (DPS) as best positioned to outrun their competitors in the transition.

Monster Match

Ranking at the top of the list, Monster Beverage is set to continue its momentum this year on “exceptionally strong fundamentals,” driven by the booming popularity of energy drinks, particularly among Millennial consumers, says Grandet. Closing up 1.1% on Thursday at $51.30, MNST reflects a 15.7% return year-to-date (YTD). Issuing a price target of $59, the analyst foresees shares gaining another 15% as the energy category expands at a 4% rate in the U.S. Grandet expects Monster to continue stealing market share from its “only serious global competitor,” Red Bull. The analyst also spoke to the firm’s Coca-Coca Co. (KO) distribution deal as “unlocking a number of promising growth avenues,” both on-premise and internationally.

 

Purchase, N.Y.-based Pepsi came next on the list as analysts suggest investors have not yet given proper credit to the marketing and financial strength of the company’s Frito-Lay franchise and the rebalancing of its U.S. beverage portfolio outside of traditional soda sales. Laurent indicates Pepsi’s snacks business is “seemingly immune to competition” while the company’s new strategy has won it “leadership positions” in some of the fastest growing categories in America such as tea, coffee and sports drinks. Shares of Pepsi traded down 0.1% on Thursday at $117.21, securing a 17.2% return over the last 12-month period. Credit Suisse issued a $124 price target on PEP, expecting another 5.8% gain. (See also: Pepsi Has ‘Fallen Victim to Media Hype’ as Soda Sales Dwindle: Analyst.)

Dr Pepper Snapple ranked third among the analyst’s top beverage stock picks largely due to its recent $1.7 billion acquisition of premium water maker Bai Brands. “From a shareholder friendly and stable US centric name thanks to the cash generated by Dr Pepper, the company is benefiting now from the full ownership of Bai, which we expect adds ~2 pts to the company’s organic growth rate,” wrote Grandet.

Trading flat on Thursday at $93.78, DPS reflects a 5.2% increase over the most recent 12-month period as analysts foresee another 19.5% upside in shares. (See also: Beverage Giants Blur Line Between Water and Soda.)

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