Molson Coors Touches 52-Week Low On Weak EBITDA Guidance
Zacks Investment Research | Jun 09, 2017 08:59AM ET
Shares of Molson Coors Brewing Company (NYSE:TAP) touched a 52 week low of $86.03 on Jun 8, eventually closing at $87.16.
We note that shares of this beverage company are down more than 9% since Wednesday, Jun 7, after CNBC pointed weak EBITDA guidance during investor meeting.
During the investor meeting, management stated that it expects underlying EBITDA margins to grow 30–60 bps per year for the next to 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.
Notably, shares of Molson Coors have underperformed both the Zacks categorized Consumer Staples sector, of which they are part of, gained 10.6%.
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. In fact, a glimpse of the company’s past performance reveals that its earnings have missed the Zacks Consensus Estimate in three of the trailing four quarters, with an average miss of 22.6%. Also, its sales lagged the same in four of the past seven quarters.
Moreover, sales and earnings declined year over year in the first quarter. While earnings were hurt by higher brand amortization expense, mix shift to higher-cost products and weaker volumes in the U.S. in the quarter, sales were affected by currency headwinds and soft sales in Europe and the U.S.
Notably, Molson Coors has been posting 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 challenging for the industry. 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.
However, the Zacks Consensus Estimate of $2.09 for the second quarter declined by a penny over the last seven days. Moving ahead, difficult economy and competitive pressure along with lower volumes and significant currency headwinds continues to remain major concerns.
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Nevertheless, 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
Some better-ranked stocks in the broader Consumer Staples sector include Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) , Energizer Holdings, Inc. (NYSE:ENR) and Tupperware Brands Corporation (NYSE:TUP) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Ollie's Bargain has a long-term earnings growth rate of 18.9%.
Energizer Holdings and Tupperware Brands have long-term earnings growth rate of 9.8% and 12%, respectively.
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