Molson Coors Brewing Co (NYSE: TAP) deserves credit for integrating the MillerCoors and Miller International acquisitions into its business, but one analyst says this is more than offset by multiple concerning trends.
Bank of America's Bryan Spillane downgraded Molson Coors from Buy to Underperform with a price target lowered from $70 to $50.
Coinciding with the closing of the Miller beer businesses into Molson Coors, growth in the industry has become "more expensive," Spillane wrote in the downgrade note. Beer companies are now left with the option of tapering profit ambitions and in Molson's case it may need to increase its pace of spending to stabilize its market share. The company may also need to invest more in premium and "beyond beer" segments over the coming years.
If this is the case, the Street is likely to reassess earnings expectations for fiscal 2019 and 2020, which may be a positive for Molson over the long term. The analyst said it would represent a near-term negative, however, as it signals Molson's core brands are declining faster compared to the broader beer category and Molson's competitors have already increased their marketing and brand support behind new products.
Bottom line, any new investments and initiatives should be seen as a "healthy" move for Molson but it will take some time to show in results, the analyst wrote.
Shares of Molson Coors were trading lower by 2% at $52.28 at time of publication.
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Latest Ratings for TAP
|Jun 2019||Initiates Coverage On||Underperform|
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