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Things You Need to Know Before Molson Coors' (TAP) Q2 Earnings

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Molson Coors Brewing Company (TAP - Free Report) is slated to release second-quarter 2019 results on Jul 31. Though the company’s performance has been improving lately, it witnessed top and bottom-line decline in the last reported quarter. This marked an earnings miss after three straight quarters of positive surprise. Meanwhile, sales missed estimates for the second consecutive quarter.

Consequently, the company posted average positive earnings surprise of 4.6% in the trailing four quarters.

The Zacks Consensus Estimate for the company’s second-quarter earnings is pegged at $1.65, suggesting a 12.2% decline from the year-ago reported figure. Notably, the consensus estimate has remained unchanged in the past 30 days.

Molson Coors Brewing Company Price and EPS Surprise

 

Molson Coors Brewing  Company Price and EPS Surprise

Molson Coors Brewing Company price-eps-surprise | Molson Coors Brewing Company Quote

Let’s see how things are shaping prior to the earnings announcement.

Factors at Play

Molson Coors is reaping benefits of positive global pricing, strength in International business and cost savings. Further, the company is encouraged by the portfolio premiumization efforts and robust innovation pipeline. Moreover, its restructuring initiatives to reduce overhead costs and boost profitability bode well. These efforts position it for long-term growth.

However, the company’s results in first-quarter 2019 were plagued by soft volume, adverse currency movements and cost inflation in all segments. Further, industry and market share declines, particularly in the United States and Canada, largely impacted results. The persistence of soft volume in these regions might prove detrimental to second-quarter 2019 results.

Further, the ongoing turmoil in the alcohol space, resulting from consumers shifting to healthy drinks and wines, is particularly hitting the beer makers hard. This resulted in weak beer volumes in the United States for the company. Molson Coors expects further contraction of the U.S. beer industry volume in the future. While it plans to offset these by accelerating its portfolio premiumization and improving industry volume share trends, uncertainty on the execution of these plans remains. Therefore, soft beer volume is likely to pull down sales numbers again in second-quarter 2019.

The Zacks Consensus Estimate for the company’s sales in the second quarter for the United States, Europe and Canada stands at $1,985 million, $380 million and $545 million, respectively. This suggests sales declines of 4.2%, 4.3% and 7%, respectively, in the United States, Europe and Canada. Notably, the consensus estimate for overall quarterly sales is pegged at $3,014 million, down 2.3% from the year-ago quarter.

Additionally, Molson Coors continues to battle input cost inflation, which has been a hindrance for a while now particularly due to higher aluminum and freight costs. Management expects these hurdles to linger in 2019. Notably, the United States remains the biggest driver of increased cost of goods sold (COGS) for the company.

For 2019, it estimates COGS per hectoliter to increase in a mid-single digit in the United States, which is similar to the 2018 level, mostly due to higher aluminum and other input costs. These hurdles along with increased tariffs on aluminum imports and beverage exports (due to the U.S.-China trade war) remain concerns for Molson Coors’ bottom line in the upcoming results. Furthermore, unfavorable foreign exchange rates are likely to mar top and bottom lines in the second quarter of 2019.

What Does Zacks Model Predict?
 
Our proven model does not conclusively predict that Molson Coors is likely to beat earnings estimates in the second quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Molson Coors’ Zacks Rank #4 (Sell) and an Earnings ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Ranks #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Stocks With Favorable Combination

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

The Estee Lauder Companies Inc. (EL - Free Report) has an Earnings ESP of +7.80% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Altria Group, Inc. (MO - Free Report) has an Earnings ESP of +0.91% and a Zacks Rank of 3.

Kellogg Company (K - Free Report) has an Earnings ESP of +0.91% and a Zacks Rank #3.

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