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Will Molson Coors (TAP) Earnings Be Hit by Low Volume?

Molson Coors Brewing Co.TAP is set to report fourth-quarter 2015 results before the opening bell on Feb 11. Last quarter, this beverage company posted a positive earnings surprise of 9.38%. It should be noted that the company posted three positive and one negative surprise in the last four quarters, bringing the average to a positive earnings surprise of 1.12%.

Let's see how things are shaping up prior to the announcement.

Factors to Consider

For the fourth quarter, the company anticipates sales in the range of $830 million to $860 million, down from a year ago, primarily due to unfavorable foreign currency movements.

The company expects adjusted earnings in the range of 46 cents to 52 cents per share and expects it to be negatively impacted by foreign currency movements, increased brand investments, and the loss of the Modelo brands and Heineken brewing contracts in the U.K. in 2015.

We also note that Molson Coors has been struggling with weak volumes in the major markets of Canada, the U.S. and Europe over the past several quarters. Despite modest recovery in the macroeconomic scenario, the company witnessed year-over-year decline in earnings and revenues in the first three quarters of 2015 due to lower volumes and unfavorable foreign currency movements. These negatives are likely to hurt results in the fourth quarter as well.

While the overall alcohol market decline is hurting beer volumes in Europe, the weak economic conditions are partially responsible for lowering volumes in the U.S. The premium beer segment in Canada has been persistently losing volume to the above-premium and value segments, mainly because of an aging population and sluggish economy. A tax increase in Québec is also hurting Canada volumes. The termination of business contracts in the U.K. and Canada also had a negative impact on sales.

Nevertheless, the company's cost-saving initiatives, continuous focus on brand building and increased marketing investments should have a positive impact on fourth-quarter results, in our view.

Earnings Whispers

Our proven model does not conclusively show that Molson Coors is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP for Molson Coors is -3.85% as the Zacks Consensus Estimate of 52 cents is higher than the Most Accurate estimate of 50 cents.

Zacks Rank: Molson Coors has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some consumer staple companies, which are worth considering, as our model shows that they have the right combination of these two elements:

Tyson Foods, Inc. TSN , with an Earnings ESP of +3.57% and a Zacks Rank #1 (Strong Buy).

Dean Foods Company DF , with an Earnings ESP of +5.88% and a Zacks Rank #3(Hold).

B&G Foods, Inc. BGS , with an Earnings ESP of +6.52% and a Zacks Rank #3.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

MOLSON COORS-B (TAP): Free Stock Analysis Report

DEAN FOODS CO (DF): Free Stock Analysis Report

TYSON FOODS A (TSN): Free Stock Analysis Report

B&G FOODS CL-A (BGS): Free Stock Analysis Report

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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.

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