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Molson Coors (TAP) Gains 13.8% in 3 Months Amid Inflation Woes

Molson Coors Beverage Company TAP has been gaining from strength in core brands, as well as the above-premium portfolio and contributions from its Revitalization Plan. This led to the impressive first-quarter 2023 results, wherein the bottom and top lines surpassed the Zacks Consensus Estimate and improved year over year.

The company’s adjusted earnings of 54 cents per share surged 86.2% year over year. Net sales grew 5.9% to $2,346.3 million. On a constant-currency basis, net sales rose 8.2%, driven by favorable price and sales mix, offset by a slight decline in financial volume. Net sales per hectoliter increased 6.1% on a reported basis and 8.4% on a constant-currency basis, driven by strong net pricing and a favorable sales mix stemming from premiumization.

Molson Coors is on track with its revitalization plan focused on achieving sustainable top-line growth by streamlining the organization and reinvesting resources into its brands and capabilities. The company intends to invest in iconic brands and growth opportunities in the above-premium beer space; expand in adjacencies and beyond beer without hampering the support for its existing large brands; and create digital competencies for commercial functions, supply-chain-related system capabilities and employees.

To facilitate these investments, Molson Coors plans to generate savings of $150 million by simplifying the structure. The company is also building on the strength of its iconic core brands. Its cost-saving program, announced in 2020, targets delivering cost savings of $600 million over three years.

Molson Coors is committed to growing its market share through innovation and premiumization. With a view to accelerating portfolio premiumization, the company has been aggressively growing its above-premium portfolio in the past few years. Its U.S. above-premium portfolio witnessed sales that outpaced its U.S. economy portfolio, driven by rapid growth of its hard seltzers, the successful launch of Simply Spiked Lemonade, and the continued strength in Blue Moon and Peroni’s.

Driven by these factors, management projects sales year-over-year growth in the low-single digits on a constant-currency basis, in line with our estimate of 1.5% growth. Underlying EBT is likely to grow year over year in the low-single digits on a constant-currency basis. Underlying depreciation and amortization are projected to be $690 million, plus or minus 5%. The company expects an underlying effective tax rate of 21-23%. Consolidated net interest expenses are anticipated to be $240 million, plus or minus 5%.

 

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Consequently, shares of this Zacks Rank #3 (Hold) company have gained 13.8% in the past three months compared with the industry’s growth of 0.5%.

However, the company continues to witness lower brand and financial volume. In first-quarter 2023, Molson Coors’ worldwide brand volumes fell 2.1% to 16.2 million due to sluggishness in America, as well as EMEA&APAC. Financial volumes declined 0.2% to 17 million hectoliters due to lower volumes in the Americas, partly offset by increased EMEA&APAC volumes.

Also, inflationary pressure related to materials, conversion and energy costs, and mixed impacts of portfolio premiumization act as deterrents. TAP has been witnessing weakened consumer demand across the beer industry mainly due to pricing actions.

Conclusion

We believe that brand strength, product innovation, pricing actions, premiumization of its global portfolio and revitalization plan are likely to drive growth for Molson Coors. Earnings estimates for TAP’s current financial year have increased 6.4% to $4.34 over the past 30 days. Topping it, long-term growth of 4.2% and a VGM Score of B raise optimism in the stock.

Stocks to Consider

We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Procter & Gamble PG, Conagra Brands CAG and Celsius Holdings CELH.

Conagra Brands, operating as a consumer-packaged goods food company, currently sports a Zacks Rank #1 (Strong Buy). CAG has a trailing four-quarter earnings surprise of 13.2%, on average. It has a long-term earnings growth rate of 6.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests improvements of 7.1% and 16.5%, respectively, from the year-ago reported number. The consensus mark for CAG’s earnings per share has moved up 3.4% in the past 30 days.

Celsius Holdings currently carries a Zacks Rank #2 (Buy). CELH specializes in commercializing healthier, nutritional functional foods, beverages and dietary supplements.

The Zacks Consensus Estimate for CELH’s current financial-year sales indicates 67.9% growth, while earnings per share are expected to rise 154% from the year-ago reported figures. The company recorded an earnings surprise of 81.8% in the last reported quarter.

Procter & Gamble currently carries a Zacks Rank #2. PG has a trailing four-quarter earnings surprise of 1.02%, on average. It has a long-term earnings growth rate of 6.1%.

The Zacks Consensus Estimate for Procter & Gamble’s current financial-year sales and earnings per share suggests growth of 1.3% and 0.9%, respectively, from the year-ago reported numbers. The consensus mark for PG’s earnings per share has moved up by a penny in the past seven days.

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Procter & Gamble Company (The) (PG) : Free Stock Analysis Report

Conagra Brands (CAG) : Free Stock Analysis Report

Molson Coors Beverage Company (TAP) : Free Stock Analysis Report

Celsius Holdings Inc. (CELH) : Free Stock Analysis Report

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