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Molson Coors Rises 5% Post Q3 Earnings: Buy, Hold or Avoid the Stock?
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Molson Coors Beverage Company’s (TAP - Free Report) shares have risen nearly 5% since it released third-quarter 2024 results on Nov. 7. The company’s top and bottom lines beat the Zacks Consensus Estimate but declined year over year.
In addition, the company lowered its 2024 sales forecast to a 1% decline on a constant-currency basis from the previously mentioned low-single-digit growth, due to the ongoing macroeconomic pressures on the U.S. beer industry and lower U.S. financial volumes during this year’s peak season.
Despite such softness, TAP stock has been rising. The stock has gained 15.5% in the past three months against the Zacks Beverages - Alcohol industry’s 3.2% decline and the broader Consumer Staples sector’s 0.1% dip. It has also outperformed the S&P 500 index’s 12.7% growth.
Strong performance of the EMEA & APAC business and robust results in Canada within the Americas segment somewhat aided the results. In the third quarter of 2024, the segment’s net sales rose 5.1% year over year on a reported basis and improved 3.8% on a constant-currency basis due to a favorable price and sales mix and positive currency effects.
TAP's Price Performance
Image Source: Zacks Investment Research
Investors might have been optimistic about Molson Coors’ latest announcement of acquiring majority ownership stake in ZOA, the better-for-you energy brand. This deal enables the company to lead the brand’s complete marketing, retail and direct-to-consumer sales and development. Management believes this places ZOA well for growth. This investment is subject to the standard regulatory approval procedures and other customary closing conditions.
More on ZOA Announcement & TAP’s 2024 Outlook
We note that the better-for-you energy drinks sales have been outperforming the broader category, which contributes to ZOA’s high-growth potential. This also includes foundational initiatives, such as packaging, new visual identity and the brand’s first-ever national marketing campaign with a A-list co-founder, Dwayne “The Rock” Johnson.
We note that ZOA’s repeat purchase rates of 50% and its ability to attract new consumers to the energy category, including 30% of its buyers new to this category, further drives optimism. ZOA’s direct-to-consumer business is a key sales driver, as the brand is placed among the top 10 energy drink brands on Amazon.
ZOA is co-founded by Dwayne “The Rock” Johnson, Dany Garcia, Dave Rienzi and John Shulman. Johnson will continue to be a visible face of the brand via the “Big Dwayne Energy” campaign and social media amplification, among others. Available in over 25,000 retail locations and more than 86,000 points of distribution across North America, the brand demonstrates TAP’s strategic ambition to enrich its total beverage portfolio. Hence, the ZOA brand is likely to tap extra sales to Molson Coors’ portfolio and increase its profitability.
Despite trimming the sales forecast, management reaffirmed its 2024 underlying EBT outlook, citing an improved cost forecast for packaging materials, transportation and administrative expenses. Molson Coors maintained its mid-single-digit growth target for underlying earnings per share (EPS). It now expects underlying EPS to reach the higher end of the target range, supported by an accelerated share repurchase program. TAP earned $5.43 per share in 2023.
Analyzing TAP’s Pros & Cons
The company is aggressively focused on portfolio premiumization in both Beer and Beyond Beer to boost the shape of its product portfolio. It has also been making impressive innovations, especially in Beyond Beer. TAP’s goal for its Above Premium portfolio is to reach nearly one-third of its brand net revenues, excluding contract brewing, in the medium term.
Molson Coors’ Acceleration Plan had been built upon the success of its Revitalization Plan implemented in 2019. The plan aims to deliver growth in the coming years. The initiative revolves around five pillars, including core power brands’ growth, portfolio premiumization, Beyond Beer expansion, investment in capabilities and support to its people and communities.
However, Molson Coors has been witnessing cost inflation with respect to materials and manufacturing expenses. In third-quarter 2024, the underlying cost of goods sold per hectoliter rose 5.6% in constant currency, mainly owing to cost inflation with respect to materials and manufacturing costs as well as deleveraged volumes and unfavorable mix in the Americas unit.
In addition, the company’s results have been largely affected by the challenging U.S. macroeconomic environment, the anticipated unfavorable shipment timing and the wind-down of a contract brewing agreement.
TAP’s Estimates Reflect a Positive Trend
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for Molson Coors’ EPS for 2024 and 2025 has risen 0.5% and 0.9%, respectively, in the past seven days.
Image Source: Zacks Investment Research
For 2024, the consensus estimate for TAP’s EPS implies 5.7% growth year over year. For 2025, the consensus mark for EPS indicates 2.1% year-over-year increase.
TAP Stock’s Attractive Valuation
Molson Coors’ stock is trading at a discount valuation relative to the industry. Going by the price/earnings ratio, the stock is currently trading at 10.18 on a forward 12-month basis, lower than 16.16 of the industry. Also, the stock is trading lower than its five-year high of 15.57.
Final Words on TAP Stock
There is no doubt that Molson Coors stock is attractively valued. Robust strategies and upward revisions in earnings estimates are major tailwinds. However, investors may remain cautious about entering at current levels, given the above-discussed challenges and a soft sales view for 2024. For those already invested, holding onto the stock seems to be a prudent choice as TAP currently carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS indicates growth of 23.4% and 193.3%, respectively, from the prior-year levels.
Vital Farms (VITL - Free Report) , which provides pasture-raised products, currently sports a Zacks Rank of 1. The consensus estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 31% and 40%, respectively, from the prior-year levels.
VITL has a trailing four-quarter average earnings surprise of 82.5%.
Nomad Foods Limited (NOMD - Free Report) , manufacturer and distributor of frozen foods, currently carries a Zacks Rank #2 (Buy). NOMD has a trailing four-quarter average earnings surprise of 3.1%.
The Zacks Consensus Estimate for NOMD’s current financial-year sales and EPS indicates growth of 4.9% and 25.5%, respectively, from the year-ago figures.
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Molson Coors Rises 5% Post Q3 Earnings: Buy, Hold or Avoid the Stock?
Molson Coors Beverage Company’s (TAP - Free Report) shares have risen nearly 5% since it released third-quarter 2024 results on Nov. 7. The company’s top and bottom lines beat the Zacks Consensus Estimate but declined year over year.
In addition, the company lowered its 2024 sales forecast to a 1% decline on a constant-currency basis from the previously mentioned low-single-digit growth, due to the ongoing macroeconomic pressures on the U.S. beer industry and lower U.S. financial volumes during this year’s peak season.
Despite such softness, TAP stock has been rising. The stock has gained 15.5% in the past three months against the Zacks Beverages - Alcohol industry’s 3.2% decline and the broader Consumer Staples sector’s 0.1% dip. It has also outperformed the S&P 500 index’s 12.7% growth.
Strong performance of the EMEA & APAC business and robust results in Canada within the Americas segment somewhat aided the results. In the third quarter of 2024, the segment’s net sales rose 5.1% year over year on a reported basis and improved 3.8% on a constant-currency basis due to a favorable price and sales mix and positive currency effects.
TAP's Price Performance
Image Source: Zacks Investment Research
Investors might have been optimistic about Molson Coors’ latest announcement of acquiring majority ownership stake in ZOA, the better-for-you energy brand. This deal enables the company to lead the brand’s complete marketing, retail and direct-to-consumer sales and development. Management believes this places ZOA well for growth. This investment is subject to the standard regulatory approval procedures and other customary closing conditions.
More on ZOA Announcement & TAP’s 2024 Outlook
We note that the better-for-you energy drinks sales have been outperforming the broader category, which contributes to ZOA’s high-growth potential. This also includes foundational initiatives, such as packaging, new visual identity and the brand’s first-ever national marketing campaign with a A-list co-founder, Dwayne “The Rock” Johnson.
We note that ZOA’s repeat purchase rates of 50% and its ability to attract new consumers to the energy category, including 30% of its buyers new to this category, further drives optimism. ZOA’s direct-to-consumer business is a key sales driver, as the brand is placed among the top 10 energy drink brands on Amazon.
ZOA is co-founded by Dwayne “The Rock” Johnson, Dany Garcia, Dave Rienzi and John Shulman. Johnson will continue to be a visible face of the brand via the “Big Dwayne Energy” campaign and social media amplification, among others. Available in over 25,000 retail locations and more than 86,000 points of distribution across North America, the brand demonstrates TAP’s strategic ambition to enrich its total beverage portfolio. Hence, the ZOA brand is likely to tap extra sales to Molson Coors’ portfolio and increase its profitability.
Despite trimming the sales forecast, management reaffirmed its 2024 underlying EBT outlook, citing an improved cost forecast for packaging materials, transportation and administrative expenses. Molson Coors maintained its mid-single-digit growth target for underlying earnings per share (EPS). It now expects underlying EPS to reach the higher end of the target range, supported by an accelerated share repurchase program. TAP earned $5.43 per share in 2023.
Analyzing TAP’s Pros & Cons
The company is aggressively focused on portfolio premiumization in both Beer and Beyond Beer to boost the shape of its product portfolio. It has also been making impressive innovations, especially in Beyond Beer. TAP’s goal for its Above Premium portfolio is to reach nearly one-third of its brand net revenues, excluding contract brewing, in the medium term.
Molson Coors’ Acceleration Plan had been built upon the success of its Revitalization Plan implemented in 2019. The plan aims to deliver growth in the coming years. The initiative revolves around five pillars, including core power brands’ growth, portfolio premiumization, Beyond Beer expansion, investment in capabilities and support to its people and communities.
However, Molson Coors has been witnessing cost inflation with respect to materials and manufacturing expenses. In third-quarter 2024, the underlying cost of goods sold per hectoliter rose 5.6% in constant currency, mainly owing to cost inflation with respect to materials and manufacturing costs as well as deleveraged volumes and unfavorable mix in the Americas unit.
In addition, the company’s results have been largely affected by the challenging U.S. macroeconomic environment, the anticipated unfavorable shipment timing and the wind-down of a contract brewing agreement.
TAP’s Estimates Reflect a Positive Trend
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for Molson Coors’ EPS for 2024 and 2025 has risen 0.5% and 0.9%, respectively, in the past seven days.
Image Source: Zacks Investment Research
For 2024, the consensus estimate for TAP’s EPS implies 5.7% growth year over year. For 2025, the consensus mark for EPS indicates 2.1% year-over-year increase.
TAP Stock’s Attractive Valuation
Molson Coors’ stock is trading at a discount valuation relative to the industry. Going by the price/earnings ratio, the stock is currently trading at 10.18 on a forward 12-month basis, lower than 16.16 of the industry. Also, the stock is trading lower than its five-year high of 15.57.
Final Words on TAP Stock
There is no doubt that Molson Coors stock is attractively valued. Robust strategies and upward revisions in earnings estimates are major tailwinds. However, investors may remain cautious about entering at current levels, given the above-discussed challenges and a soft sales view for 2024. For those already invested, holding onto the stock seems to be a prudent choice as TAP currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Freshpet, Inc. (FRPT - Free Report) , a pet food company, has a trailing four-quarter average earnings surprise of 132.9%. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS indicates growth of 23.4% and 193.3%, respectively, from the prior-year levels.
Vital Farms (VITL - Free Report) , which provides pasture-raised products, currently sports a Zacks Rank of 1. The consensus estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 31% and 40%, respectively, from the prior-year levels.
VITL has a trailing four-quarter average earnings surprise of 82.5%.
Nomad Foods Limited (NOMD - Free Report) , manufacturer and distributor of frozen foods, currently carries a Zacks Rank #2 (Buy). NOMD has a trailing four-quarter average earnings surprise of 3.1%.
The Zacks Consensus Estimate for NOMD’s current financial-year sales and EPS indicates growth of 4.9% and 25.5%, respectively, from the year-ago figures.