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Molson Coors Shares Down on Weak Volumes: Will It Rebound?

Zacks

Molson Coors Brewing Company TAP is going through a rough phase as evident from its dismal earnings and sales surprise history. Lower volumes and significant currency headwinds amid difficult economy and competitive pressure have been other major deterrents.

Shares of Molson Coors have underperformed both the Zacks categorized Beverages–Alcoholic industry and the broader sector on a year-to-date basis. The stock has declined 11.5% against the industry’s gain of 9.2%. Meanwhile, the Zacks categorized Consumer Staples sector, of which they are part of, has improved 7.6%. However, Molson Coors’ management is leaving no stone unturned to bring the stock back on growth trajectory.

What’s Troubling the Stock?

Molson Coors has been recording negative beer volumes in the U.S. and Canada for quite some time. In the U.S., the company witnessed declines due to reduced labor participation rates and lower consumer confidence. Though economic conditions improved slightly, competition from outside the beer category remained. In the first quarter, both the U.S. domestic sales-to-retailers volume (STRs) and domestic sales-to-wholesalers volume (STWs) declined 2% and 4%, respectively.


Last month, CNBC also pointed weak EBITDA guidance during investors meeting. Per reports, the company now expects underlying EBITDA margins to grow 30–60 bps per year for the next three to four years. This is weaker than the company’s previous expectation of 50–60 bps per year for the next three years, as announced during earnings conference.

In fact, Molson Coors began 2017 on a dismal note and reported lower-than-expected results for the second time when it posted first-quarter 2017 results on May 3. A glimpse at the company’s past performance reveals that it has lagged earnings estimate in three of the trailing four quarters, with an average miss of 22.6%. Also, sales lagged the same in four of the last seven quarters.

Further, the Zacks Consensus Estimate of $2.07 for the second quarter declined by a penny over the last 30 days. The stock also holds a VGM score of ‘D’, which makes it unfavorable at the moment.

Molson Coors Brewing Company Price, Consensus and EPS Surprise

Molson Coors Brewing Company Price, Consensus and EPS Surprise | Molson Coors Brewing Company Quote

Initiatives

Molson Coors has been undertaking restructuring initiatives to reduce overhead costs and boost profitability. Moving ahead, management plans to deliver more than $175 million as cost savings in 2017. The company expects to generate $550 million of cost savings by the year 2019. Notably, this Zacks Rank #3 (Hold) company boasts a strong portfolio of well-established brands and consistently makes innovations to expand its market share.

Furthermore, the company is expanding global footprint and accelerating its international business through acquisitions. Whether these ongoing initiatives will be able to spark a turnaround in the company’s performance, is a wait-and-watch story.

Stocks to Consider

A better-ranked stock in the alcohol industry includes Craft Brew Alliance, Inc. BREW, which sports a Zacks Rank #1 (Strong Buy) and has posted a positive earnings surprise of 50% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Investors interested in the broader Consumer Staples sector can also consider Ollie's Bargain Outlet Holdings, Inc. OLLI and Energizer Holdings, Inc. ENR, both carrying a Zacks Rank #2 (Buy).

While Ollie's Bargain has a long-term earnings growth rate of 18.9%, Energizer Holdings has a long-term earnings growth rate of 9.8%.

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