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Molson Coors' (TAP) Premium Brands Place It Well: Apt to Hold?

Molson Coors Beverage Company TAP has all it takes to create a niche in the market. Its most prominent trait is its strong portfolio of well-established brands, which makes it one of the largest brewers in the world. The company remains committed to growing its market share through innovation and premiumization. To accelerate portfolio premiumization, the company has been aggressively growing its above-premium portfolio for the past few years.

Molson Coors is also building on the strength of its iconic core brands. The company intends to invest in iconic brands and growth opportunities in the above-premium beer space; expand in adjacencies and beyond beer without hampering the support for its existing large brands; and create digital competencies for commercial functions, supply-chain-related system capabilities and employees. The company is also building on the strength of its iconic core brands.

TAP has been making efforts to shape up its product portfolio and expand in growth areas. Its U.S. above-premium portfolio witnessed sales that outpaced its U.S. economy portfolio, driven by the rapid growth of its hard seltzers, and the continued strength in Blue Moon and Peroni’s.

The company’s above-premium portfolio, encompassing both beer and beyond beer, also benefits from continued growth from successful innovations like Madri in the U.K. and Simply Spiked in the United States and Canada.

Molson Coors has been gaining from brand strength and strong performances across its portfolio and both geographical segments. Strong portfolio performance, strength in both business units, and continued momentum in Coors Light and Miller Lite in the United States have been aiding TAP’s performance. This led to impressive first-quarter 2024 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year.

Additionally, the company is well-placed, driven by the progress of its revitalization plan. The plan is focused on achieving sustainable top-line growth by streamlining the organization and reinvesting resources into its brands and capabilities. Additionally, its cost-saving program announced in 2020 targets delivering cost savings of $600 million over three years.

Hurdles Holding Back the Stock

Shares of the Zacks Rank #3 (Hold) company have lost 15.2% compared with the industry’s 10% decline in the year-to-date period. The stock’s downside can be mainly attributed to pressures related to cost inflation concerning materials and manufacturing expenses, and an unfavorable mix.

 

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Zacks Investment Research


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In first-quarter 2024, the cost of goods sold (COGS) rose 3.6% on a reported basis, mainly owing to increased financial volumes and adverse foreign currency impacts, partly offset by lower COGS per hectoliter. Underlying COGS per hectoliter jumped 0.9% in constant currency due to cost inflation concerning materials, and manufacturing costs and an adverse mix, driven by lower contract brewing volumes in the Americas.

Marketing, general and administrative costs increased 6.4% year over year on a reported basis mainly due to higher marketing investment to support brands and innovations.

Management anticipates the inflation impacts on COGS in the quarters ahead. For 2024, underlying depreciation and amortization are projected to be $700 million, plus or minus 5%. Consolidated net interest expenses are anticipated to be $210 million, plus or minus 5%.

Stocks to Consider

We highlighted some better-ranked stocks from the broader Consumer Staples space, namely The Vita Coco Company Inc. COCO, Freshpet FRPT and PepsiCo, Inc. PEP.

Vita Coco, a producer and marketer of coconut water products under the Vita Coco brand name, currently flaunts a Zacks Rank of 1 (Strong Buy). COCO has a trailing four-quarter earnings surprise of 25.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for COCO’s current financial-year sales and earnings suggests growth of 3.5% and 40.5%, respectively, from the year-ago reported figures.

Freshpet is a pet food company, which manufactures and markets natural fresh foods, refrigerated meals, and treats for dogs and cats in the United States and Canada. It presently sports a Zacks Rank of 1.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings indicates advancements of 24.8% and 177.1%, respectively, from the year-ago reported figures. It has a trailing four-quarter earnings surprise of 118.2%, on average.

PepsiCo is one of the leading global food and beverage companies. It currently carries a Zacks Rank #2 (Buy). PEP has a trailing four-quarter earnings surprise of 5.1%, on average.

The Zacks Consensus Estimate for PepsiCo’s current financial year’s sales and earnings suggests growth of 3.4% and 7.1%, respectively, from the year-ago reported numbers.

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

Freshpet, Inc. (FRPT) : Free Stock Analysis Report

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Zacks Investment Research