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Here's Why Molson Coors (TAP) is an Attractive Investment for 2021

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Zacks Equity Research
·5 min read
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Molson Coors Beverage Company TAP has retained a strong position in the beverage market, thanks to an impressive diverse portfolio of owned and partner brands. Amid the pandemic, the company has been capitalizing on the increased at-home consumption trend and the demand for hard seltzers.

It is also 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, which should position it to sustain growth in the near and longer-term. Moreover, it remains committed to growing its market share through innovation and premiumization.

Buoyed by the above-mentioned factors, shares of this Denver, CO-based company have rallied 29.3% in the past three months compared with the industry’s growth of 13%. This Zacks Rank #2 (Buy) stock has also comfortably outperformed the Consumer Staples sector and the S&P 500 Index, which advanced 3% and 11%, respectively.

 


 

Moreover, the Zacks Consensus Estimate for Molson Coors’ 2021 sales indicates a rise of 5.2% from the projected sales figure for 2020. The company delivered an earnings surprise of 61.3%, on average, in the trailing four quarters.

Strategies to Aid Growth

As part of the revitalization plan, the company has been focused on building the strength of its iconic core brands, growing the above-premium portfolio, expanding beyond beer and investing in capabilities to drive top-line growth. To facilitate these investments, it plans to generate savings of nearly $150 million by simplifying the structure.

Moreover, it aims to stabilize share gains for its biggest brands in the total beer category. In Europe, the national champion brands have been witnessing considerable sequential improvement in volume trend, owing to the phased reopening of on-premise with restrictions. It has been aggressively growing its above premium portfolio and also expanding beyond beer categories.

With a view to accelerate portfolio premiumization, the company has been aggressively growing its above premium portfolio in the past few years. The above-premium products constituted the major portion of its U.S. portfolio in the third quarter of 2020. Notably, in 2020, Blue Moon LightSky became the top-selling new beer in the United States and Blue Moon witnessed largest growth in off-premise among all craft brands, per Nielsen. Moreover, its joint venture with Yuengling will bring its iconic beers westward of the United States for the first time.

To further grow its portfolio, it acquired Atwater Brewing and launched Coors Seltzer at the end of August. Notably, the company’s seltzer portfolio is witnessing robust growth with Vizzy Hard Seltzer rising to the 8th spot on the Neilsen growth charts for 2020 and Coors Seltzer becoming the #1 beer brand in the segment since its launch. After the success of its Vizzy and Coors Seltzer hard seltzer brands, it is making an all-out effort to expand its share in the fast-growing U.S. hard seltzer market through its exclusive partnership to produce, market and distribute The Coca-Cola Company’s KO Topo Chico hard seltzer in the United States. It expects to capture double-digit share of the U.S. seltzer market by the end of 2021, having the most complete seltzer portfolio.

Additionally, Molson Coors is investing to expand the production capacity of hard seltzer by more than 400% and Blue Moon LightSky by nearly 400% to support continued growth.

While growing the seltzer portfolio is a key part of its “beyond beer” approach, the company is on track with the expansion in various other lines. Notably, Truss — its Canada cannabis joint venture – has become a market leader in the ready-to-drink cannabis market, with an estimated share of more than 50% in key markets like Quebec.

Also, the company recently launched a line of non-alcoholic beverages in partnership with LA Libations LLC and Vyne Botanicals hop water in Canada. It also has in place a distribution deal for La Colomes line up of ready-to-drink coffees in off-premise channels. Moreover, it expects its emerging drug division to become a $1-billion business, in revenue terms, in three years’ time.

As part of other efforts to sustain growth, it has commissioned a sleek can production line, with a capacity to produce 750 million cans per year. During the pandemic, it improved online sales in the United States by 200% through the three-tier structure. Moreover, it is now creating new e-commerce and direct-to-consumer channels for its Canada business.

Conclusion

We believe the company’s growth initiatives, strong portfolio and hard seltzer presence position it well for continued growth in 2021. This is further supported by a Value Score of B and an expected long-term earnings growth rate of 3.7%.

Other Consumer Staples Stocks to Watch

Coca-Cola European Partners PLC’s CCEP Zacks Consensus Estimate for 2021 earnings has gone up by a penny in the past 60 days. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Sysco Corporation SYY, also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 11%.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>


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Molson Coors Beverage Company (TAP) : Free Stock Analysis Report
 
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