Molson Coors Brewing Co.
) is set to report second quarter 2013 results on Aug 6. Last
quarter, it posted a negative surprise of 14.3%. Let's see how
things are shaping up for this announcement.
Factors to Consider this Quarter
Molson Coors is struggling in terms of sales volume decline
for the past three years. In Canada, the substantial excise tax
increase in Québec, which was enforced in Nov 2012, lowered
volumes further as the company has a significant market share in
Despite its marketing investments in the Miller Lite and
Molson Brands, volume growth has been rather inconsistent. The
recovery in the U.S. economy and the acquisition of the StarBev
business are likely to boost volumes eventually but we do not
expect the change to reflect in the second quarter.
Moreover, the company's limited cash due to debt obligations
related to StarBev acquisition has forced the company to
discontinue its buyback policy. The company expects to use its
cash principally for deleveraging debt for the next 2-3 years and
therefore it does not expect to make any further repurchases in
the coming quarter. This is expected to hurt earnings growth in
the second quarter.
However, we feel that Molson Coors' increased focus on
non-beer drinks and high-profitable areas of the U.S. beer market
is expected to drive sales in the second quarter, as it had in
the first quarter.
Our proven model does not conclusively show that Molson Coors
is likely to beat earnings this quarter. That is because a stock
needs to have both a positive earnings expected surprise
prediction (ESP) (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank #1, #2 or #3 for this to happen. That is not
the case here as shown below.
Negative Zacks ESP:
The Most Accurate estimate stands at $1.38 while the Zacks
Consensus Estimate is higher at $1.39. That is a difference of
Zacks Rank #4 (Sell):
Molson Coors holds a Zacks Rank #4 (Sell). We caution investors
against stocks with Zacks Rank #4 and #5 (Sell rated stocks)
going into the earnings announcement, especially when the company
is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies in the consumer staples sector
that can be considered as our model shows that they have the
right combination of elements to post an earnings beat this
Sanderson Farms Inc
), Earnings ESP of +5.66% and a Zacks Rank #3 (Hold).
Monster Beverage Corp.
), Earnings ESP of +3.13% and a Zacks Rank #2 (Buy).
General Mills Inc.
), Earnings ESP of +1.43% and a Zacks Rank #3 (Hold).
GENL MILLS (GIS): Free Stock Analysis Report
MONSTER BEVERAG (MNST): Free Stock Analysis
SANDERSON FARMS (SAFM): Free Stock Analysis
MOLSON COORS-B (TAP): Free Stock Analysis
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