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Why Is Molson Coors (TAP) Up 4.8% Since Last Earnings Report?
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A month has gone by since the last earnings report for Molson Coors Brewing (TAP - Free Report) . Shares have added about 4.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Molson Coors due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Molson Coors' Q4 Earnings Miss Estimates, Decline Y/Y
Molson Coors reported dismal fourth-quarter 2020 results, with earnings and sales lagging the Zacks Consensus Estimate and declining year over year. The company’s adjusted earnings of 40 cents per share tumbled 60.8% year over year and missed the Zacks Consensus Estimate of 76 cents. Decline in sales and lower financial volume coupled with higher cost of goods sold per hectoliter as well as higher marketing, general and administrative (MG&A) expenses hurt the bottom line.
Net sales declined 7.7% to $2,294.3 million and lagged the Zacks Consensus Estimate of $2,408 million. The downside was mainly caused by decline in financial volume, 26.4% drop in Europe stemming from further on-premise restrictions in the U.K. and adverse channel mix. This was partly offset by increased net pricing in North America and Europe as well as favorable brand and package mix in the United States that led to a 1.9% rise in net sales on a brand-volume basis. On a constant-currency (cc) basis, net sales fell 8.3%. Notably, net sales per hectoliter increased 3.7% on a brand-volume basis.
However, Molson Coors’ worldwide brand volume declined 11.3% to 19.3 million hectoliters and financial volume declined 9.6% to 19.7 million hectoliters.
Underlying (non-GAAP) EBITDA plunged 33.4% to $375.1 million year over year. Further, underlying EBITDA declined 33.6% year over year at cc.
Segmental Details
Molson Coors operates through the following geographical segments:
North America: Net sales in the segment dropped 0.8% to $1,994.8 million on a reported basis and 1%at cc, thanks to decline in financial and brand volume. This was offset by higher year-over-year shipment trends in the United States. North America brand volumes declined 6.9%, while financial volume fell 3.9%. The downside was due to restrictions in on-premise outlet operations as well as packaging concerns that led to declines in economy and premium segments. In the reported quarter, shipment trends in North America improved as the company is building distributor inventory levels, despite being hurt by aluminum can supply constraints.
In the United States, brand volumes fell 6.2%, while domestic shipment was down 2.3%. In Canada and Latin America, brand volume declined 13.2% and 6.8%, respectively, in the reported quarter. Net sales per hectoliter, on a brand volume basis, rose 3.1% at cc on favorable brand and package mix in the United States as well as higher net pricing in the United States and Canada. This was offset by adverse brand and channel mix in Canada due to the shift of volume from on-premise to off-premise. Underlying EBITDA fell 17.2% on a reported basis to $388.3 million and 17.7% at cc.
Europe: The segment’s net sales on a reported basis declined 37.2% to $303.1 million and 39.4% at cc. The downtick was due to lower volume and drop in net sales per hectoliter, thanks to the impacts of the pandemic. Net sales per hectoliter (brand volume basis) in the segment were down 8.2%, resulting from an unfavorable channel, brand and geographic mix.
The adverse geographic mix is mainly related to its high-margin U.K. business that has greater exposure to the on-premise channel. The business was re-opened in the third quarter but with restrictions. The segment’s financial volume fell 26.4% and brand volumes were down 23.4%, hurt by nearly 40%-plunge in brand volumes due to further on-premise restrictions. The segment reported underlying EBITDA loss of $20.8 million versus underlying EBITDA income of $85.7 million.
Other Financial Updates
Molson Coors ended the fourth quarter with cash and cash equivalents of $770.1 million. At the end of 2020, the company had total debt of about $8.2 billion, resulting in net debt of $7.5 billion. Notably, the company lowered net debt by $1.1 billion since Dec 31, 2019.
It had cash flow from operating activities of $1,695.7 million during 2020, with an underlying free cash flow of $1,266.3 million.
Outlook
Despite the current uncertainties, management provided view for 2021. Management expects that the company’s board will reinstate a dividend in the second half 2021. The company is progressing with its revitalization plan, which targets long-term revenue and underlying EBITDA expansion.
Net sales are projected to grow mid-single digit at constant currency. Underlying EBITDA is likely to remain almost flat year over year at cc. Management estimates achieving a net debt to underlying EBITDA ratio of nearly 3.25x by 2021 end and below 3.0x by 2022 end.
Further, underlying depreciation and amortization are projected at nearly $800 million, while underlying effective tax rate are likely to be in the bracket of 20. Consolidated net interest expenses are anticipated at nearly $270 million, plus or minus 5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Molson Coors has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. It's no surprise Molson Coors has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is Molson Coors (TAP) Up 4.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Molson Coors Brewing (TAP - Free Report) . Shares have added about 4.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Molson Coors due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Molson Coors' Q4 Earnings Miss Estimates, Decline Y/Y
Molson Coors reported dismal fourth-quarter 2020 results, with earnings and sales lagging the Zacks Consensus Estimate and declining year over year. The company’s adjusted earnings of 40 cents per share tumbled 60.8% year over year and missed the Zacks Consensus Estimate of 76 cents. Decline in sales and lower financial volume coupled with higher cost of goods sold per hectoliter as well as higher marketing, general and administrative (MG&A) expenses hurt the bottom line.
Net sales declined 7.7% to $2,294.3 million and lagged the Zacks Consensus Estimate of $2,408 million. The downside was mainly caused by decline in financial volume, 26.4% drop in Europe stemming from further on-premise restrictions in the U.K. and adverse channel mix. This was partly offset by increased net pricing in North America and Europe as well as favorable brand and package mix in the United States that led to a 1.9% rise in net sales on a brand-volume basis. On a constant-currency (cc) basis, net sales fell 8.3%. Notably, net sales per hectoliter increased 3.7% on a brand-volume basis.
However, Molson Coors’ worldwide brand volume declined 11.3% to 19.3 million hectoliters and financial volume declined 9.6% to 19.7 million hectoliters.
Underlying (non-GAAP) EBITDA plunged 33.4% to $375.1 million year over year. Further, underlying EBITDA declined 33.6% year over year at cc.
Segmental Details
Molson Coors operates through the following geographical segments:
North America: Net sales in the segment dropped 0.8% to $1,994.8 million on a reported basis and 1%at cc, thanks to decline in financial and brand volume. This was offset by higher year-over-year shipment trends in the United States. North America brand volumes declined 6.9%, while financial volume fell 3.9%. The downside was due to restrictions in on-premise outlet operations as well as packaging concerns that led to declines in economy and premium segments. In the reported quarter, shipment trends in North America improved as the company is building distributor inventory levels, despite being hurt by aluminum can supply constraints.
In the United States, brand volumes fell 6.2%, while domestic shipment was down 2.3%. In Canada and Latin America, brand volume declined 13.2% and 6.8%, respectively, in the reported quarter. Net sales per hectoliter, on a brand volume basis, rose 3.1% at cc on favorable brand and package mix in the United States as well as higher net pricing in the United States and Canada. This was offset by adverse brand and channel mix in Canada due to the shift of volume from on-premise to off-premise. Underlying EBITDA fell 17.2% on a reported basis to $388.3 million and 17.7% at cc.
Europe: The segment’s net sales on a reported basis declined 37.2% to $303.1 million and 39.4% at cc. The downtick was due to lower volume and drop in net sales per hectoliter, thanks to the impacts of the pandemic. Net sales per hectoliter (brand volume basis) in the segment were down 8.2%, resulting from an unfavorable channel, brand and geographic mix.
The adverse geographic mix is mainly related to its high-margin U.K. business that has greater exposure to the on-premise channel. The business was re-opened in the third quarter but with restrictions. The segment’s financial volume fell 26.4% and brand volumes were down 23.4%, hurt by nearly 40%-plunge in brand volumes due to further on-premise restrictions. The segment reported underlying EBITDA loss of $20.8 million versus underlying EBITDA income of $85.7 million.
Other Financial Updates
Molson Coors ended the fourth quarter with cash and cash equivalents of $770.1 million. At the end of 2020, the company had total debt of about $8.2 billion, resulting in net debt of $7.5 billion. Notably, the company lowered net debt by $1.1 billion since Dec 31, 2019.
It had cash flow from operating activities of $1,695.7 million during 2020, with an underlying free cash flow of $1,266.3 million.
Outlook
Despite the current uncertainties, management provided view for 2021. Management expects that the company’s board will reinstate a dividend in the second half 2021. The company is progressing with its revitalization plan, which targets long-term revenue and underlying EBITDA expansion.
Net sales are projected to grow mid-single digit at constant currency. Underlying EBITDA is likely to remain almost flat year over year at cc. Management estimates achieving a net debt to underlying EBITDA ratio of nearly 3.25x by 2021 end and below 3.0x by 2022 end.
Further, underlying depreciation and amortization are projected at nearly $800 million, while underlying effective tax rate are likely to be in the bracket of 20. Consolidated net interest expenses are anticipated at nearly $270 million, plus or minus 5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Molson Coors has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. It's no surprise Molson Coors has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.