Molson Coors Beverage Company TAP has posted impressive second-quarter 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and improved year over year. The results have been mainly aided by an improved price and sales mix, offset by adverse currency, and soft financial and brand volumes, led by lower contract brewing volumes.
The quarterly results reflect significant progress against the Acceleration Plan. Progress on its premiumization strategy varies across markets. The company has achieved strong success in EMEA&APAC, Canada and Latin America, whereas in the United States, it has focused plans on track to drive improvement.
Shares of Molson Coors advanced 6.4% in the pre-market trading session on Aug 6, backed by strong sales and earnings performances in the second quarter of 2024. The Zacks Rank #3 (Hold) company has lost 12.3% in the past three months compared with the industry’s 6.6% decline.
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Quarterly Details
The company’s adjusted earnings of $1.92 per share increased 7.9% year over year and surpassed the Zacks Consensus Estimate of $1.68.
Net sales declined 0.4% year over year to $3.25 billion and beat the Zacks Consensus Estimate of $3.18 billion. The decline was driven by lower financial volume and negative impacts of foreign currency, partly offset by a rise in the price and sales mix. On a constant-currency basis, net sales dropped 0.1%.
Financial volumes declined 4.1% year over year, mainly led by lower contract brewing volumes in the Americas segment. Brand volumes fell 4.9% on a 7.3% rise in the Americas, offset by a 2% increase in EMEA&APAC.
Net sales were positively influenced by the price and sales mix, which increased 4% year over year, predominantly due to higher net pricing and a favorable sales mix in both segments despite reduced contract brewing volumes in the United States.
Molson Coors Beverage Company Price, Consensus and EPS Surprise
Molson Coors Beverage Company price-consensus-eps-surprise-chart | Molson Coors Beverage Company Quote
Gross profit increased 9.1% year over year to $1.3 billion and the gross margin expanded 310 basis points to 34.6% in the quarter.
Marketing, general and administrative (MG&A) expenses dipped 0.9% year over year to $728.5 million on a reported basis, primarily on lower incentive compensation expenses and favorable currency rates, offset by higher marketing investments to bolster its brands and innovations. The underlying MG&A fell 0.4% in constant currency.
The underlying earnings before taxes (EBT) rose 5.8% year over year to $531.2 million. On a constant-currency basis, underlying EBT rose 5.2%, primarily attributed to higher net pricing, a favorable sales mix, and cost-saving initiatives. These gains were partially offset by lower financial volume and cost inflation related to materials and manufacturing expenses.
Segmental Information
Americas: Net sales in the segment declined 1.7% year over year to $2.6 billion on a reported basis and 1.5% on a constant-currency basis. The decline was driven by lower financial volume and unfavorable currency impacts, offset by a positive price and sales mix.
Financial volumes fell 5.6% year over year primarily due to a decline in contract brewing volumes in the United States. This drop is associated with the wind-down of a contract brewing agreement, which is set to conclude by the end of 2024, along with a 7.3% reduction in U.S. brand volume. However, the impacts were partially mitigated by the favorable timing of U.S. shipments.
Underlying EBT improved 0.2% on a constant-currency basis and was flat at $487.4 million on a reported basis. The increase can be attributed to higher net pricing, a favorable sales mix, lower MG&A expenses and cost-saving initiatives. This was partly negated by reduced financial volumes, and cost inflation on materials and manufacturing expenses.
EMEA&APAC: The segment’s net sales (on a reported basis) rose 5.3% year over year to $683.3 million and improved 6.1% on a constant-currency basis, driven by a favorable price and sales mix, and improved financial volume, partly offset by unfavorable currency rates. The price and sales mix improved 5.8%, owing to higher net pricing and a favorable sales mix led by premiumization.
Financial volumes rose 0.3% year over year and the brand volume advanced 2%, driven by volume growth in Central and Eastern Europe, led by strength in core power brands and above-premium brands, along with easing inflationary pressures. This was partly offset by soft volumes in Western Europe due to reduced market demand and elevated promotions from competition.
The segment’s underlying EBT increased 26.2% year over year to $81 million on a reported basis and 29% on a constant-currency basis. The increase stemmed from higher net pricing, favorable sales mix and cost-saving initiatives, partially offset by higher MG&A expenses. The increase in MG&A expenses was led by elevated marketing to support its brands and innovations, and the impacts of cost inflation.
Other Financial Updates
Molson Coors ended the second quarter with cash and cash equivalents of $1.6 billion. As of Jun 30, 2024, the company had a total debt of $7.06 billion, resulting in a net debt of $5.41 billion.
Net cash provided by operating activities amounted to $894.6 million in the first six months of 2024. Moreover, the company generated a free cash flow of $505 million as of Jun 30, 2024.
In the six months ending on Jun 30, 2024, TAP repurchased shares worth $375.3 million as part of the program approved on Sep 29, 2023. Additionally, it paid out dividends of $188.4 million as of Jun 30, 2024.
The company estimates a capital expenditure of $750 million (plus or minus 5%) for 2024. The underlying free cash flow is expected to be $1.2 billion, plus or minus 10%.
Outlook
Management has issued a guidance for 2024. Net sales are projected to increase in the low-single digits year over year on a constant-currency basis. Underlying EBT is anticipated to improve in the mid-single digits on a constant-currency basis. Underlying earnings per share are estimated to rise in the mid-single digits.
Underlying depreciation and amortization are projected to be $700 million, plus or minus 5%. The company expects an underlying effective tax rate of 23-25% for 2024. 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 Vital Farms VITL, The Coca-Cola Company KO and Colgate-Palmolive CL.
Vital Farms offers a range of produced pasture-raised foods. It currently sports a Zacks Rank #1 (Strong Buy). VITL has a trailing four-quarter earnings surprise of 102.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate Vital Farms’ current financial-year sales and EPS indicates growth of 24.9% and 66.1%, respectively, from the year-ago reported numbers. The consensus mark for VITL’s EPS has moved up 2.1% in the past 30 days.
Coca-Cola, a leading beverage company, presently carries a Zacks Rank #2 (Buy). KO has a trailing four-quarter earnings surprise of 4.7%, on average.
The Zacks Consensus Estimate for Coca-Cola’s current financial year’s sales and EPS indicates growth of 0.5% and 5.6%, respectively, from the year-ago reported numbers. The consensus mark for KO’s EPS has moved up 0.7% in the past 30 days.
Colgate, a leading consumer goods company, currently has a Zacks Rank of 2. CL has a trailing four-quarter earnings surprise of 4.8%, on average.
The Zacks Consensus Estimate for CL’s current financial-year sales and earnings suggests growth of 3.8% and 10.5%, respectively, from the year-ago reported figures. The consensus mark for Colgate’s EPS has moved up 0.6% in the past seven days.
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