Interactive Investor

ii view: Fevertree happy with full-year forecasts

27th May 2022 15:46

Keith Bowman from interactive investor

Shares in this maker of premium drink mixers and soft drinks are down around 40% year-to-date. We assess prospects. 

Early year AGM trading update

  • Leaves full-year 2022 adjusted profit estimate unchanged

ii round-up:

Launched in 2005, Fevertree Drinks (LSE:FEVR) is today a maker of premium drink mixers and soft drinks whose products are sold in more than 80 countries. 

Its carbonated drinks, regularly used as mixers with alcoholic spirits, are supplied to customers including hotels, restaurants, bars and cafes or on-trade outlets, as well as supermarkets and off-licenses or off-trade retailers. 

Fevertree's drinks include tonics, ginger ales, ginger beer, cola, sodas and lemonades.

For a round-up of this latest update, please click here.

ii view:

Fevertree generated sales of £311 million during its latest financial year, almost double that achieved in 2017. Headquartered in West London, the drinks manufacturer came to the UK stock market in 2014. Its home UK market still accounts for its biggest slug of sales at almost 40%, followed by Europe at around 28%, the US at 25%, and the rest of the world the balance. 

For investors, industry-wide logistics disruption, most notably for shipping products to the US, and broad inflationary cost pressures, continue to offer headwinds. An estimated one-year price/earnings ratio sat above that of fellow beverage makers Diageo (LSE:DGE) and Britvic (LSE:BVIC), suggests the shares are not obviously cheap, while the ongoing conflict in Ukraine and a cost-of-living crisis almost globally could have some dampening impact on future sales. 

On the upside, a recovery in its bar, or on-trade sales is ongoing following the pandemic. Strong plans with its retail, or off-trade customers have been flagged, notably around the Platinum Jubilee celebrations, while some current cost hinderances should be aided given expanded production plans in the US itself in future. Demand for spirits also continues to grow ahead of beer and wine according to management. On balance, and while some caution is advised given inflationary cost headwinds, ongoing product innovation and growing sales overseas leaves grounds for longer-term positivity. 

Positives: 

  • Diversified geographical sales
  • Strong brand 

Negatives:

  • Battling cost headwinds
  • Uncertain economic outlook

The average rating of stock market analysts:

Strong hold

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