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Molson Coors Reaches 52-Week High

Zacks Equity Research

Shares of Molson Coors Brewing Co. (TAP) reached a new 52-week high of $56.26 on Nov 6, following the release of solid third quarter 2013 results on Nov 5. Shares of this beverage company eventually closed at $54.69, reflecting a year-to-date return of 28.1%.

The company’s long-term estimated EPS growth rate is 4.97%. Average volume of shares traded over the last three months came in at approximately 942K.

Third Quarter Results

On Nov 6, Molson Coors reported its third quarter 2013 results. Adjusted earnings of $1.45 per share beat the Zacks Consensus Estimate by 6.6% and improved 5.8% from the prior-year quarter. The upswing in earnings was driven by improved pre-tax earnings in its U.S., Europe and International businesses. Lower interest expense and lower quarterly tax rate also led to earnings growth in the quarter.

Though sales were impacted by weak consumer demand across all markets owing to macro-economic headwinds, the company continued to invest in its core brands. Underlying pre-tax income also increased 4.2% in the third quarter of 2013. Currency headwinds also favorably impacted underlying pre-tax income by $2 million in the quarter.

We are encouraged by the fact that the company is generating a mid-single-digit percent of sales owing to its product innovation. The company’s above-premium brand portfolio is growing at a double-digit rate globally, which is also appealing. The company is also on track with its cost savings program and cash generation targets. Molson Coors paid nearly $282 million worth of net debt in the quarter, which in turn will improve the company’s efficiency.

Management continues to expect weak consumer demand in the coming quarters due to ongoing macro-economic headwinds. We also note that Molson Coors has been struggling in terms of sales volume decline for the past three years. However, we believe that the company’s initiatives and increased marketing investments in its brands will help drive volumes. Molson Coors currently holds a Zacks Rank #3 (Hold).

Other Stocks to Consider

Other beverage companies which are worth considering include Constellation Brands Inc. (STZ), Boston Beer Co. (SAM) and Truett-Hurst Inc. (THST). While Constellation holds a Zacks Rank #1 (Strong Buy), Boston Beer and Truett-Hurst carry a Zacks Rank #2 (Buy).

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