Morgan Stanley advised investors that the beverage sector is a potential shelter from the macroeconomic storm given strong pricing power, limited volume demand elasticity, and a post-COVID topline recovery in away-from-home volume.
The firm noted that Q4 U.S. scanner data is looking strong and numerous beverage companies have more robust long-term secular topline growth drivers than other household product stocks.
Analyst Dara Mohsenian and team named Monster Beverage (MNST) as its top sector pick off what it sees as strong category growth, an expanding U.S. category with recent healthier products, and international market share gains. The firm also has an Overweight rating on Constellation Brands (STZ) on its view evidence is building for rebounding beer topline growth and strong momentum with key brands Modelo Especial, Corona Extra, and Pacifico. PepsiCo (PEP) is also a favorite of Morgan Stanley. The beverage powerhouse is said to have accelerated organic sales growth at a level that is not yet priced into valuation.