Molson Coors Beverage Currently Up Nine Consecutive Days, Longest Winning Streak Since November 2022 — Data Talk

The S&P 500 Index Tuesday closed down -0.29%, the Dow Jones Industrials Index closed down -0.86%, and the Nasdaq 100 Index closed down -0.17%.

Stock indexes settled moderately lower on Tuesday as they consolidated the past week’s rally to record highs. Higher bond yields Tuesday fueled some profit-taking pressures in stocks following five straight sessions of gains. Also, long liquidation in stocks ahead of Wednesday's US consumer price report weighed on the overall market.

Stocks have rallied sharply over the past week, with the S&P 500, Dow Jones Industrials, and the Nasdaq 100 posting new record highs on speculation President-elect Trump will boost corporate profits through tax cuts and reduced regulation.

Positive Fed comments on Tuesday were bullish for stocks. Richmond Fed President Barkin said the US economy looks "pretty good," and the Fed is in a position to respond however the economy evolves. Also, Minneapolis Fed President Kashkari said only inflation could derail a Fed rate cut in December, and "if we saw inflation surprises to the upside between now and then, that might give us pause."

The markets are looking ahead to Wednesday’s US consumer price report for October, with Oct CPI expected to climb to +2.6% y/y, up from +2.4% y/y in Sep, and core Oct CPI expected to remain unchanged from Sep at +3.3% y/y. Also, Friday’s report on retail sales will be looked at to see if consumer spending is holding up. Oct retail sales are expected to be up +0.3% m/m, and Oct retail sales ex-autos are also expected to be up +0.3% m/m.

Of the 85% of companies in the S&P 500 that have released Q3 earnings so far, 75% surpassed the estimates, slightly below the 3-year average. According to Bloomberg Intelligence, companies in the S&P 500 have reported an average +8.4% y/y increase in quarterly earnings in Q3, more than double the preseason forecast.

The markets are discounting the chances at 62% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets Tuesday settled lower. The Euro Stoxx 50 tumbled to a 2-month low and closed down -2.25%. China's Shanghai Composite Index closed down -1.39%. Japan's Nikkei Stock 225 closed down -0.40%.

Interest Rates

December 10-year T-notes (ZNZ24) Tuesday closed down by -15.5 ticks. The 10-year T-note yield rose +13.1 bp to 4.435%. T-notes were under pressure Tuesday from carryover weakness in European government bonds. Also, upbeat comments Tuesday from Richmond Fed President Barkin curbed safe-haven demand for T-notes when he said the US economy looks "pretty good." In addition, concerns about inflationary pressures of future policies from President-elect Trump are weighing on T-notes.

European government bond yields Tuesday moved higher. The 10-year German bund yield rebounded from a 1-1/2 week low of 2.299% and finished up +3.6 bp to 2.362%. The 10-year UK gilt yield rose +7.4 bp to 4.499%.

The German Nov ZEW survey expectations of economic growth unexpectedly fell -3.7 to 7.4 versus expectations of an increase to 13.2.

ECB Governing Council member Rehn said disinflation in the Eurozone is "well on track," and the growth outlook "seems to be weakening," and "that strengthens the case for an ECB rate cut in December."

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 23% for a -50 bp rate cut at the same meeting.

US Stock Movers

Mosaic closed down more than -7% to lead losers in the S&P 500 after reporting Q3 net sales of $2.8 billion, weaker than the consensus of $3.14 billion.

GE Vernova closed down more than -7% after the Financial Times reported that CEO Strazik said the company plans to postpone searching for new offshore turbine orders until market conditions improve.

Home builders retreated Tuesday after the 10-year T-note yield jumped more than +13 bp, which boosts mortgage rates and is negative for housing demand. As a result, PulteGroup , Lennar , DR Horton , and Toll Brothers closed down more than -3%.

Elevance Health closed down more than -2% after the CFO said he sees pressure in Medicaid persisting in 2025 and sees Medicare Advantage margins missing their 2025 targets.

Neurogene closed down more than -43% after a disclosure indicated an emerging serious adverse event in a trial participant for the experimental Rett syndrome drug.

Alnylam Pharmaceuticals closed down more than -3% after Wolfe Research downgraded the stock to underperform from peer perform with a price target of $205.

Knight-Swift Transportation Holdings closed down more than -4% after Citigroup downgraded the stock to sell from neutral with a price target of $56.

Airbnb closed down more than -2% after Phillip Securities downgraded the stock to reduce from neutral with a price target of $120.

Tyson Foods closed up more than +6% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of 92 cents, stronger than the consensus of 72 cents.

Honeywell International closed up more than +3% to lead gainers in the Dow Jones Industrials and Nasdaq 100 after Elliot Investment Management said it built a $5 billion stake in the company and is calling for a breakup of the company.

Live Nation Entertainment closed up more than +4% after reporting Q3 adjusted operating income of $909.8 million, stronger than the consensus of $856.6 million.

Nvidia closed up more than +2% after Redburn initiated coverage on the stock with a buy recommendation and a price target of $178.

Shopify closed up more than +21% after reporting Q3 revenue of $2.16 billion, better than the consensus of $2.12 billion.

Twilio closed up more than +2% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $120.

Molson Coors Beverage closed up more than +2% after JPMorgan Chase said the latest data showed improving trends for the company as the latest 4-week trend to November 2 saw dollar takeaway down -1.9%, an improvement of 200 bp over the prior 4-week period.

Earnings Reports (11/13/2024)

Cisco Systems Inc (CSCO), Loar Holdings Inc (LOAR), NU Holdings Ltd/Cayman Islands (NU), Tetra Tech Inc (TTEK).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.

Molson Coors Beverage Company’s TAP shares have risen nearly 5% since it released third-quarter 2024 results on Nov. 7. The company’s top and bottom lines beat the Zacks Consensus Estimate but declined year over year.

In addition, the company lowered its 2024 sales forecast to a 1% decline on a constant-currency basis from the previously mentioned low-single-digit growth, due to the ongoing macroeconomic pressures on the U.S. beer industry and lower U.S. financial volumes during this year’s peak season.

Despite such softness, TAP stock has been rising. The stock has gained 15.5% in the past three months against the Zacks Beverages - Alcohol industry’s 3.2% decline and the broader Consumer Staples sector’s 0.1% dip. It has also outperformed the S&P 500 index’s 12.7% growth.

Strong performance of the EMEA & APAC business and robust results in Canada within the Americas segment somewhat aided the results. In the third quarter of 2024, the segment’s net sales rose 5.1% year over year on a reported basis and improved 3.8% on a constant-currency basis due to a favorable price and sales mix and positive currency effects.

TAP's Price Performance

Investors might have been optimistic about Molson Coors’ latest announcement of acquiring majority ownership stake in ZOA, the better-for-you energy brand. This deal enables the company to lead the brand’s complete marketing, retail and direct-to-consumer sales and development. Management believes this places ZOA well for growth. This investment is subject to the standard regulatory approval procedures and other customary closing conditions.

More on ZOA Announcement & TAP’s 2024 Outlook

We note that the better-for-you energy drinks sales have been outperforming the broader category, which contributes to ZOA’s high-growth potential. This also includes foundational initiatives, such as packaging, new visual identity and the brand’s first-ever national marketing campaign with a A-list co-founder, Dwayne “The Rock” Johnson.

We note that ZOA’s repeat purchase rates of 50% and its ability to attract new consumers to the energy category, including 30% of its buyers new to this category, further drives optimism. ZOA’s direct-to-consumer business is a key sales driver, as the brand is placed among the top 10 energy drink brands on Amazon.

ZOA is co-founded by Dwayne “The Rock” Johnson, Dany Garcia, Dave Rienzi and John Shulman. Johnson will continue to be a visible face of the brand via the “Big Dwayne Energy” campaign and social media amplification, among others. Available in over 25,000 retail locations and more than 86,000 points of distribution across North America, the brand demonstrates TAP’s strategic ambition to enrich its total beverage portfolio. Hence, the ZOA brand is likely to tap extra sales to Molson Coors’ portfolio and increase its profitability.

Despite trimming the sales forecast, management reaffirmed its 2024 underlying EBT outlook, citing an improved cost forecast for packaging materials, transportation and administrative expenses. Molson Coors maintained its mid-single-digit growth target for underlying earnings per share (EPS). It now expects underlying EPS to reach the higher end of the target range, supported by an accelerated share repurchase program. TAP earned $5.43 per share in 2023.

Analyzing TAP’s Pros & Cons

The company is aggressively focused on portfolio premiumization in both Beer and Beyond Beer to boost the shape of its product portfolio. It has also been making impressive innovations, especially in Beyond Beer. TAP’s goal for its Above Premium portfolio is to reach nearly one-third of its brand net revenues, excluding contract brewing, in the medium term.

Molson Coors’ Acceleration Plan had been built upon the success of its Revitalization Plan implemented in 2019. The plan aims to deliver growth in the coming years. The initiative revolves around five pillars, including core power brands’ growth, portfolio premiumization, Beyond Beer expansion, investment in capabilities and support to its people and communities.

However, Molson Coors has been witnessing cost inflation with respect to materials and manufacturing expenses. In third-quarter 2024, the underlying cost of goods sold per hectoliter rose 5.6% in constant currency, mainly owing to cost inflation with respect to materials and manufacturing costs as well as deleveraged volumes and unfavorable mix in the Americas unit.

In addition, the company’s results have been largely affected by the challenging U.S. macroeconomic environment, the anticipated unfavorable shipment timing and the wind-down of a contract brewing agreement.

TAP’s Estimates Reflect a Positive Trend

Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for Molson Coors’ EPS for 2024 and 2025 has risen 0.5% and 0.9%, respectively, in the past seven days.

For 2024, the consensus estimate for TAP’s EPS implies 5.7% growth year over year. For 2025, the consensus mark for EPS indicates 2.1% year-over-year increase.

TAP Stock’s Attractive Valuation

Molson Coors’ stock is trading at a discount valuation relative to the industry. Going by the price/earnings ratio, the stock is currently trading at 10.18 on a forward 12-month basis, lower than 16.16 of the industry. Also, the stock is trading lower than its five-year high of 15.57.

Final Words on TAP Stock

There is no doubt that Molson Coors stock is attractively valued. Robust strategies and upward revisions in earnings estimates are major tailwinds. However, investors may remain cautious about entering at current levels, given the above-discussed challenges and a soft sales view for 2024. For those already invested, holding onto the stock seems to be a prudent choice as TAP currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Freshpet, Inc. FRPT, a pet food company, has a trailing four-quarter average earnings surprise of 132.9%. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS indicates growth of 23.4% and 193.3%, respectively, from the prior-year levels.

Vital Farms VITL, which provides pasture-raised products, currently sports a Zacks Rank of 1. The consensus estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 31% and 40%, respectively, from the prior-year levels.

VITL has a trailing four-quarter average earnings surprise of 82.5%.

Nomad Foods Limited NOMD, manufacturer and distributor of frozen foods, currently carries a Zacks Rank #2 (Buy). NOMD has a trailing four-quarter average earnings surprise of 3.1%.

The Zacks Consensus Estimate for NOMD’s current financial-year sales and EPS indicates growth of 4.9% and 25.5%, respectively, from the year-ago figures.

Zacks Investment Research