Top Coffee Stocks for Q1 2022

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.

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%. These market performance numbers and all statistics in the tables below are as of Jan. 7, 2022.

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

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.

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• 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. The company announced in mid-December 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 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. The company announced in mid-December 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 throughout 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 last month by employees of a Starbucks location in Buffalo, NY. The approval of the vote means that the store becomes the second Starbucks location in the U.S. to unionize. Starbucks has 10 days to challenge the decision made by the NLRB.

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.

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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 non-alcoholic beverage products including coffee. The company serves customers throughout North America.

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

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• J.M. Smucker Co.: See above for company description.
• 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 at the end of December 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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