Molson Coors ( TAP ) is now a Zacks Rank #5 (Sell) and the Bear of the day. The company is a popular manufacturer and distributer of beer and other beverage products. The company sells its products under the Coors Light, Molson Canadian, Coors Banquet, Keystone Light, among others. In addition, they brews or distribute under the Amstel Light, Heineken, Murphy's, Newcastle Brown Ale, Strongbow cider, Desperados, Dos Equis, Moretti, Sol, Tecate, Miller Chill, and Miller Genuine Draft brands.
Consolidation rumors have given the stock a bid of late, as it has outperformed the indices over the last six months. However, there are signs that the stock is a little too foamy and should be sold at current levels.
Valuation
The Alcoholic beverage industry is ranked 239 out of 265 (Bottom 10%) of the Zacks industry rank. The rise of local craft beers and the popularity of premium beer, wine and liquor have hurt some of the bigger brewers. Consolidation has grown to help gain exposure to market trends, but that comes at a cost.
Molson Coors has a market cap of $15.5 Billion with a Forward PE of 23. The company sports Zacks Style Scores of "F" in Growth and Value.
Stock Offering
Late last month, Molson Coors priced 21.1 Million shares of common stock at $86.50 a share, 13% of all shares outstanding. The pricing unfortunately came in at a 2% discount from the previous close. This is a sign that demand for the shares aren't as strong as bulls would like. The company recently acquired SABMiller's stake in Molson Coors so the offering was somewhat expected.
Earnings and Estimates
The company reports earnings on February 11th, with a Zacks consensus estimate of $0.52. In the last 60 days, estimates for the quarter have fallen 5.4%. For fiscal year 2016, analysts have lowered estimates 5.8%, from $3.94 to $3.71. Investors should be cautious heading into earnings, as companies are being punished in this market if they surprise to the downside.
A Better Option
The alcohol beverage industry is hurting, but stocks most stocks haven't reflected that due to the possibility of consolidation. If one must enter the sector it would be wise to pick one of the most diversified companies out there.
Constellation Brands ( STZ ) is a Zacks Rank #2 (BUY) that is a leading international producer and marketer of beverage alcohol brands. They have a diverse global portfolio that allows them to take advantage of beverage trends and dynamic economies. The company has a market cap of $27 Billion with a forward PE of 25. Constellation is a Growth and Momentum play with a Style Scores of "B" in both categories.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
