We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why Molson Coors (TAP) is Marching Ahead of Its Industry
Read MoreHide Full Article
Molson Coors Beverage Company (TAP - Free Report) looks well-placed on the back of its revitalization plan and the premiumization of the global portfolio. Strong portfolio performance, strength in both business units, and the continued momentum in Coors Light and Miller Lite in the United States bode well.
This led to sales growth of 12% to $3,267 million in second-quarter 2023. On a constant-currency basis, net sales rose 12.1%, driven by a favorable price and sales mix, and higher financial volume. Net sales per hectoliter increased 8.7% on a reported basis and 9% on a constant-currency basis, driven by strong net pricing, and a favorable sales mix stemming from the premiumization and geographic mix.
Molson Coors’ worldwide brand volumes rose 5% to 22.8 million, driven by strength in America, partially offset by the sluggishness in EMEA & APAC. Financial volumes advanced 2.8% to 23.4 million hectoliters due to higher volumes in the Americas, partly offset by increased EMEA & APAC volumes. Also, adjusted earnings of $1.78 per share jumped 50% year over year.
We note that shares of this Zacks Rank #3 (Hold) company have gained 24.9% in the past year compared with the industry’s growth of 0.3%.
Image Source: Zacks Investment Research
Analysts also seem optimistic about the stock. The Zacks Consensus Estimate for Molson Coors’ fiscal 2023 sales and EPS is pegged at $11.7 billion and $5.06, suggesting respective growth of 9.2% and 23.4% from the year-ago reported figures. The Zacks Consensus Estimate for TAP’s 2023 earnings for the current financial year has inched up by a penny in the past 30 days.
Other Strategic Efforts
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, and expand in adjacencies and beyond beer. Additionally, the company’s cost-saving program announced in 2020 targets $600 million over three years.
It is also building on the strength of its iconic core brands. Strength in Coors Light, Miller Lite and Coors Banquet together resulted in total industry share growth in the United States, driven by brand positionings and better marketing. Molson Canadian and Carling beer in the U.K., and national champion brands witnessed significant market share gains.
Molson Coors is one of the largest brewers in the world and boasts a strong portfolio of well-established brands. The company is committed to growing its market share through innovation and premiumization. With a view to accelerating portfolio premiumization, it has been aggressively growing its above-premium portfolio in the past few years.
The company is making efforts to change the shape of its product portfolio and expand in growth areas. Its U.S. above-premium portfolio witnessed sales that outpaced its U.S. economy portfolio, driven by rapid growth of its hard seltzers, the launch of Simply Spiked Lemonade, and the continued strength in Blue Moon and Peroni’s.
Driven by these factors, management has raised the 2023 view on strength in core brands in the United States. The company intends to increase investment in C-store shopper marketing in the second half of this year. Also, favorable volume leverage is expected to partly offset cost increases. This, along with premiumization and lower contract brewing volumes, is anticipated to drive the gross margin expansion for the year.
Net sales are projected to grow year over year in the high-single digits on a constant-currency basis, up from the prior mentioned low-single-digit growth. This will be backed by sturdy demand in the United States, with growth in rates and volumes. Underlying EBT is likely to grow 23-26% year over year compared with the earlier stated low-single-digit growth on a constant-currency basis.
Other Side of the Story
Despite such upsides, not all is good in the hood for Molson Coors. The company continues to witness softness in the beer industry. Also, inflationary pressures are likely to be headwinds.
Molson Coors has been witnessing weakened consumer demand across the beer industry due to pricing actions. Although management raised the view for 2023, it highlighted the softness in the beer industry and caution around the consumer. The company’s business in the EMEA and APAC is likely to continue witnessing relatively high inflationary pressures.
Management expects another headwind in relation to the large US contract brewing agreement. The agreement has started to wind down ahead of its termination at the end of 2024. Hence, it anticipates volume declines under this contract to be higher in the fourth quarter, with an impact of 2-3% of America's financial volume.
The company has been affected by cost inflation related to materials and manufacturing expenses, and an unfavorable mix. Cost inflation drove an 80% rise in higher material and manufacturing costs. Management anticipates inflation impacts on cost of goods sold for 2023.
Underlying MG&A expenses are projected to be $100 million higher in the second half than that reported in the first half. The same indicates a year-over-year rise of 15%. This will be driven by elevated marketing spend, which is likely to be up $100 million, coupled with increased people-related costs.
Conclusion
We believe brand strength, product innovation, the premiumization of its global portfolio and the revitalization plan will offset cost woes and drive growth for Molson Coors.
The PEG ratio for Molson Coors is just 1.36, lower than the industry average of 1.82. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, TAP is a solid choice on the value front from multiple angles. Topping it, a VGM Score of A raises optimism in the stock.
Stocks to Consider
Flowers Foods (FLO - Free Report) emphasizes providing high-quality baked items. The company currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 2.3%.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales suggests growth of 6.7% from the year-ago period’s actual. FLO has a trailing four-quarter earnings surprise of 7.6%, on average.
The J. M. Smucker Company (SJM - Free Report) , which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 14%, on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year earnings suggests growth of 6.8% from the year-ago reported figure.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks. It currently carries a Zacks Rank #2. UTZ’s expected EPS growth rate for three to five years is 11.4%.
The Zacks Consensus Estimate for Utz Brands’ current fiscal-year sales suggests growth of 3.7% from the year-ago reported number. UTZ has a trailing four-quarter earnings surprise of 12.3%, on average.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Here's Why Molson Coors (TAP) is Marching Ahead of Its Industry
Molson Coors Beverage Company (TAP - Free Report) looks well-placed on the back of its revitalization plan and the premiumization of the global portfolio. Strong portfolio performance, strength in both business units, and the continued momentum in Coors Light and Miller Lite in the United States bode well.
This led to sales growth of 12% to $3,267 million in second-quarter 2023. On a constant-currency basis, net sales rose 12.1%, driven by a favorable price and sales mix, and higher financial volume. Net sales per hectoliter increased 8.7% on a reported basis and 9% on a constant-currency basis, driven by strong net pricing, and a favorable sales mix stemming from the premiumization and geographic mix.
Molson Coors’ worldwide brand volumes rose 5% to 22.8 million, driven by strength in America, partially offset by the sluggishness in EMEA & APAC. Financial volumes advanced 2.8% to 23.4 million hectoliters due to higher volumes in the Americas, partly offset by increased EMEA & APAC volumes. Also, adjusted earnings of $1.78 per share jumped 50% year over year.
We note that shares of this Zacks Rank #3 (Hold) company have gained 24.9% in the past year compared with the industry’s growth of 0.3%.
Image Source: Zacks Investment Research
Analysts also seem optimistic about the stock. The Zacks Consensus Estimate for Molson Coors’ fiscal 2023 sales and EPS is pegged at $11.7 billion and $5.06, suggesting respective growth of 9.2% and 23.4% from the year-ago reported figures. The Zacks Consensus Estimate for TAP’s 2023 earnings for the current financial year has inched up by a penny in the past 30 days.
Other Strategic Efforts
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, and expand in adjacencies and beyond beer. Additionally, the company’s cost-saving program announced in 2020 targets $600 million over three years.
It is also building on the strength of its iconic core brands. Strength in Coors Light, Miller Lite and Coors Banquet together resulted in total industry share growth in the United States, driven by brand positionings and better marketing. Molson Canadian and Carling beer in the U.K., and national champion brands witnessed significant market share gains.
Molson Coors is one of the largest brewers in the world and boasts a strong portfolio of well-established brands. The company is committed to growing its market share through innovation and premiumization. With a view to accelerating portfolio premiumization, it has been aggressively growing its above-premium portfolio in the past few years.
The company is making efforts to change the shape of its product portfolio and expand in growth areas. Its U.S. above-premium portfolio witnessed sales that outpaced its U.S. economy portfolio, driven by rapid growth of its hard seltzers, the launch of Simply Spiked Lemonade, and the continued strength in Blue Moon and Peroni’s.
Driven by these factors, management has raised the 2023 view on strength in core brands in the United States. The company intends to increase investment in C-store shopper marketing in the second half of this year. Also, favorable volume leverage is expected to partly offset cost increases. This, along with premiumization and lower contract brewing volumes, is anticipated to drive the gross margin expansion for the year.
Net sales are projected to grow year over year in the high-single digits on a constant-currency basis, up from the prior mentioned low-single-digit growth. This will be backed by sturdy demand in the United States, with growth in rates and volumes. Underlying EBT is likely to grow 23-26% year over year compared with the earlier stated low-single-digit growth on a constant-currency basis.
Other Side of the Story
Despite such upsides, not all is good in the hood for Molson Coors. The company continues to witness softness in the beer industry. Also, inflationary pressures are likely to be headwinds.
Molson Coors has been witnessing weakened consumer demand across the beer industry due to pricing actions. Although management raised the view for 2023, it highlighted the softness in the beer industry and caution around the consumer. The company’s business in the EMEA and APAC is likely to continue witnessing relatively high inflationary pressures.
Management expects another headwind in relation to the large US contract brewing agreement. The agreement has started to wind down ahead of its termination at the end of 2024. Hence, it anticipates volume declines under this contract to be higher in the fourth quarter, with an impact of 2-3% of America's financial volume.
The company has been affected by cost inflation related to materials and manufacturing expenses, and an unfavorable mix. Cost inflation drove an 80% rise in higher material and manufacturing costs. Management anticipates inflation impacts on cost of goods sold for 2023.
Underlying MG&A expenses are projected to be $100 million higher in the second half than that reported in the first half. The same indicates a year-over-year rise of 15%. This will be driven by elevated marketing spend, which is likely to be up $100 million, coupled with increased people-related costs.
Conclusion
We believe brand strength, product innovation, the premiumization of its global portfolio and the revitalization plan will offset cost woes and drive growth for Molson Coors.
The PEG ratio for Molson Coors is just 1.36, lower than the industry average of 1.82. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, TAP is a solid choice on the value front from multiple angles. Topping it, a VGM Score of A raises optimism in the stock.
Stocks to Consider
Flowers Foods (FLO - Free Report) emphasizes providing high-quality baked items. The company currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 2.3%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales suggests growth of 6.7% from the year-ago period’s actual. FLO has a trailing four-quarter earnings surprise of 7.6%, on average.
The J. M. Smucker Company (SJM - Free Report) , which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 14%, on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year earnings suggests growth of 6.8% from the year-ago reported figure.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks. It currently carries a Zacks Rank #2. UTZ’s expected EPS growth rate for three to five years is 11.4%.
The Zacks Consensus Estimate for Utz Brands’ current fiscal-year sales suggests growth of 3.7% from the year-ago reported number. UTZ has a trailing four-quarter earnings surprise of 12.3%, on average.