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We expect beverage maker Molson Coors Brewing Company (TAP - Analyst Report) to beat expectations when it reports first quarter 2013 results on May 7.

Why a Likely Positive Surprise?

Our proven model shows that Molson Coors is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Molson Coors’Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) stands at +2.86%. This represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): Molson Coors currently carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement. 

The combination of the stock’s Zacks Rank #3 (Hold) and an ESP of +2.86% makes us confident of an earnings beat on May 7.

What is Driving the Better Than Expected Earnings?

The improvement in beer volumes on the back of a recovery in the U.S. economy and increase in consumer spending is driving the stock higher. In addition, the company is making efforts to expand in fast growing emerging markets and introduce new products, going forward. The addition of the StarBev operations is also expected to boost net sales growth in the upcoming quarter.

The acquisition of StarBev (June 2012) has significantly enhanced the company’s portfolio of premium brands, despite a sluggish European economy. It has also created opportunities for the company in Central Europe to extend its key brands, taking advantage of the attractive beer market. Also, with economic recovery underway in the U.S. and China, the company expects increased consumer spending.

Overall, we are encouraged with the company’s strong brand portfolio and cost-saving initiatives. Molson Coors has also grown its market share through innovation. Other than this, the company liquidated its under-performing China joint venture, restructured its Coors Light business in the rest of China, improved performance in Japan, and integrated the Central Europe license and export business in 2012. These initiatives are expected to improve the efficiency of the organization and generate additional resources to invest in brands and innovation in the coming quarters.

Other Stocks to Consider

Molson Coors is not the only firm looking up this earnings season. You can also consider these stocks that offer exposure to the attractive consumer staples sector:

J&J Snack Foods Corp (JJSF - Snapshot Report) with Earnings ESP of +0.90% and a Zacks Rank #2 (Buy)

Campbell Soup Company (CPB - Analyst Report) with Earnings ESP of +1.79% and a Zacks Rank #2 (Buy)

Hillshire Brand Company (HSH - Snapshot Report) with Earnings ESP of +6.67% and a Zacks Rank #2 (Buy).

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