Shares of Molson Coors Brewing ( TAP ) are riding high today, moving up by roughly 5.6% in midday trading. This sharp move higher comes on elevated volume too, mostly on speculation over deals in the brewing space.
Some seem to believe that if Anheuser-Busch InBev ( BUD ) makes a play for SABMiller ( SBMRY ), it will allow MillerCoors to buy out the rest of its joint venture from InBev's target. This would be done in order to allow InBev's takeover attempt to pass regulatory hurdles, as a combination of Budweiser and SABMiller may not receive an anti-trust stamp of approval otherwise.
Plus, according to a recent Bloomberg article, TAP's net cash flow has been very strong and that the firm is now in a good place to purchase the rest of the joint venture. According to a Societe Generale analyst , 'That puts Molson Coors in a very strong position to buy that 58% at a very low price.'
This speculation is helping to push shares of TAP up to a fresh 52 week high, while the prospect of further consolidation in the industry, though against a formidable foe, has to be a bit unsettling. Nevertheless, the buyout of the joint venture, if done at an attractive price, could be interesting for TAP, especially if the company can figure out more ways to target craft beer markets which are still growing at an impressive clip.
Currently, both BUD and TAP have Zacks Ranks of #3 (Hold). It is also worth noting that the beverage alcoholic industry is in the bottom 10% of all industries, so earnings estimates aren't exactly looking favorable for this space right now. In fact, not a single company has a rank above a hold right now, while fully seven of the 15 names in the space have a #4 rank or worse.
Given this trend, it is pretty clear that some headwinds might be developing in the alcoholic beverage market. However, TAP's recent earnings estimates have been trending higher in the past two months.
The current full year earnings consensus is up compared to where it was 60 days ago, while a 7% growth rate is projected for the year. And if TAP can make some headway thanks to further consolidation in the space we might see these estimates revise up even further, though there are definitely some challenges facing the industry in the near term.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.