Invest in Molson Coors Stock: The Value Play for Beverages

BEAT

Molson Coors Beverages

49,95 €

-0.21 (-0.42%)

(As of 09.07.2024 ET)

52-week range

$49.19

▼

70,90 €

Dividend yield

3.52%

P/E

9.99

Target price

$65.07

Molson Coors Beverage Co. NYSE: TAP The stock recently fell to a 52-week low as it struggled to sustain any attempts at recovery. The negative trend has dominated the stock’s performance since the company released its first-quarter 2024 earnings report. The brewer of popular beers and hard seltzers is not alone in seeing negative year-to-date performance, as shares of many of its peers are also in the red. However, given a compelling price-to-earnings (P/E) ratio of 8.78 and an annual dividend yield of 3.52%, value investors may want to invest in the shares.

Molson Coors operates in the consumer goods sector and competes with other alcoholic beverage manufacturers, including Anheuser-Busch InBev SA/NV NYSE: BUD with a P/E ratio of 17.73, Constellation Brands Inc. NYSE: STZ with a forward P/E ratio of 18.96 and The Boston Beer Co. NYSE: SAM with a P/E ratio of 28.78.

Molson Coors is a leader thanks to its diversified brand portfolio

The name Molson Coors immediately suggests the merger of the Canadian beer brand Molson and the American beer brand Coors. This has been the case for over two centuries. The company has expanded its domestic and international beverage portfolio to include over 120 brands since the acquisition of SABMiller in 2015.

Its well-known beer brands include Coors Light, Miller Light, Blue Moon, Foster’s, George Killian’s, Mickeys, Milwaukee’s Best and Icehouse. Hard seltzer and cider brands include Vizzy Hard Seltzer, Topo Chico Hard Seltzer, Redd’s Hard Apple, Rekorderlig Cider, Miami Cocktail Co., Arizona Hard, Arnold Palmer Spiked and Lixir Drinks. Its foray into the $150 billion non-alcoholic beverage and mocktail market includes brands such as Peroni 0.0, ZOA Energy, Coors Edge, Blue Moon Belgian White and Staropramen Non-Alcoholic.

TAP stock is in a descending triangle pattern

The daily candlestick chart for TAP shows a descending triangle pattern. The descending trendline formed on May 31, 2024, at $55.08, as shares made lower highs on bounces toward the flat lower trendline at $48.19. TAP attempted to break out of the triangle by breaking the descending trendline for a day before being pulled back down as it approached the apex. The relative strength index (RSI) turned lower again and fluctuated near the oversold 30-band. Pullback support levels are at $49.19, $46.90, $42.60, and $40.41.

US sales and volume were the highlight of the first quarter of 2024

Molson Coors reported Q1 2024 earnings per share of 95 cents, beating consensus estimates of 74 cents by 21 cents. Revenue increased 10.7% year over year to $2.6 billion, beating consensus estimates of $2.5 billion. Core brands drove double-digit volume growth at Coors Light and Coors Banquet, high single-digit brand volume growth at Miller Lite in the U.S. and double-digit brand volume growth at Ozujsko in Croatia.

Despite industry weakness in the U.S. and Canada during the year, significant progress was made. U.S. financial volumes increased 7.5% year-over-year. U.S. sales to wholesalers exceeded sales to retailers by 750,000 hectoliters. U.S. GAAP earnings before taxes improved 160.5% year-over-year due to higher financial volumes, increased net prices and a favorable sales mix, partially offset by cost inflation in materials and manufacturing costs.

Financial volume in Western Europe slightly declining

Financial volumes decreased slightly by 0.2% due to challenges in the UK off-premise business which resulted in lower volumes. Increased volumes in Central and Eastern Europe partially offset this as inflationary pressures eased. Branded volumes increased by 1.9% due to increased volumes in Central and Eastern Europe, partially offset by lower volumes in Western Europe. The company repurchased $111 million of shares at an average price of $63.18.

Molson Coors’ financial prospects are not convincing

Molson Coors has provided its outlook for 2024. Net sales are expected to grow low-single digits year-over-year on a constant currency basis. Underlying income is expected to grow mid-single digits year-over-year. Underlying diluted earnings per share are expected to grow mid-single digits year-over-year. Capital expenditures are expected to be approximately $750 million +/- 5%. Underlying free cash flow is expected to be approximately $1.2 billion +/- 10%.

Volume expectations for Molson Coors in full year 2024

U.S. brands’ volumes are expected to exceed domestic shipment volumes for the remainder of 2024. Sales volumes to wholesalers in the first quarter of 2024 exceeded sales volumes to retailers by more than 750,000 hectoliters, while the difference in the first quarter of 2023 was 100,000 hectoliters. The settlement of a contract brewery agreement, which is due to close by year-end, is expected to reduce financial volumes for the year’s balance by 1.6 million hectoliters.

Tracy Joubert, CFO of Molson Coors, commented: “Strong volume in the Americas and favorable net pricing in both businesses drove double-digit revenue growth, while volume leverage and ongoing cost savings drove significant margin expansion in the quarter. We accomplished all of this while continuing to invest in our business and returning over $200 million to our shareholders in the form of a quarterly cash dividend and share repurchases.”

Molson Coors analyst ratings and price targets are at MarketBeat. The analysts’ consensus price target of $65.07 implies an upside potential of 30.19%.

Before you consider Molson Coors Beverage, here’s what you should hear.

MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients every day. MarketBeat has identified the five stocks that top analysts are secretly whispering to their clients to buy now before the broader market catches on… and Molson Coors Beverage wasn’t on the list.

While Molson Coors Beverage is currently rated “Hold” by analysts, the highest-rated analysts believe these five stocks represent better buying opportunities.

Check out the five stocks here

As the AI ​​market becomes more exciting, investors who have a vision for artificial intelligence can reap real rewards. Learn more about the industry as a whole, as well as seven companies that are doing their jobs with the power of AI.

Get this free report

Did you like this article? Share it with a colleague.

Link copied to clipboard.