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Molson Coors : The One Stock You Need to Buy Before It Skyrockets

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About the company:

Molson Coors Beverage Company ($TAP) is a leading global brewer that produces and markets a portfolio of beer and other beverage brands. The company operates through four segments: North America, Europe, International, and Corporate. The company’s flagship brands include Coors Light, Miller Lite, Molson Canadian, Carling, Staropramen, Blue Moon, Leinenkugel’s, Miller High Life, Keystone Light, and Coors Banquet. The company also offers hard seltzers, hard coffee, canned cocktails, non-alcoholic beverages, and cannabis-infused beverages. The company was founded in 1786 and is headquartered in Chicago, Illinois.

Business model:

Molson Coors Beverage Company follows a diversified business model that leverages its scale, geographic reach, brand portfolio, and innovation capabilities to drive growth and profitability. The company’s strategy is focused on three pillars: revitalizing its core brands, expanding beyond beer into new categories and occasions, and creating new digital capabilities and revenue streams. The company sells its products through various channels, including on-premise (bars and restaurants), off-premise (retailers), e-commerce, and direct-to-consumer. The company also partners with other beverage companies to distribute their products in certain markets.

Expectations:

Molson Coors Beverage Company has a positive outlook for 2023 and beyond, as it expects to benefit from its strategic initiatives, improved operational efficiency, favorable pricing and mix, and recovery of the on-premise channel. The company reaffirmed its full-year 2023 guidance for net sales growth of mid-single digits on a constant currency basis and underlying EBITDA growth of high-single to low-double digits on a constant currency basis. The company also expects to generate free cash flow of at least $1.1 billion in 2023 and to reduce its debt leverage ratio to below 3.75x by the end of 2023. The company plans to invest in its brands, innovation, digital transformation, sustainability, and talent development to support its long-term growth objectives.

The company’s outlook is based on several assumptions, including the recovery of the on-premise channel as COVID-19 restrictions ease, the mitigation of inflationary pressures through pricing actions and productivity initiatives, the resolution of the cyberattack incident without material long-term impact, and the continued execution of its strategic priorities.

Recent acquisitions:

Molson Coors Beverage Company did not report any recent acquisitions in its Q1 2023 earnings release or call transcript. However, the company did announce several partnerships and joint ventures in the past year to expand its portfolio and reach new consumers. Some of these include:

– A partnership with D.G. Yuengling & Son Inc. to bring Yuengling beers to the West Coast for the first time.
– A joint venture with HEXO Corp. to produce non-alcoholic cannabis-infused beverages for the Canadian market under the Truss brand.
– A distribution agreement with The Coca-Cola Company to launch Topo Chico Hard Seltzer in the U.S.
– A partnership with La Colombe Coffee Roasters to launch Hard Cold Brew Coffee in the U.S.
– A joint venture with Cerveceria Regional to brew and distribute Coors Light in Colombia.
– A distribution agreement with Heineken N.V. to import Sol beer into Canada.

Most recent quarterly earnings:

Molson Coors Beverage Company (TAP) reported net sales of $2.34 billion for the first quarter of 2023, up 5.9% year-over-year and beating the consensus estimate of $2.23 billion. The net sales growth was driven by favorable pricing and mix, partially offset by lower volume. The company’s financial volume decreased 1.8% to 15.8 million hectoliters, mainly due to the impact of the cyberattack incident in March and the continued restrictions on the on-premise channel due to the COVID-19 pandemic.

The company’s GAAP net income decreased 52% to $72.5 million, or $0.33 per share, compared to $151.5 million, or $0.70 per share, in the same period last year. The GAAP net income decline was primarily due to higher restructuring costs, impairment losses, and other non-core expenses, partially offset by lower income tax expense. The company’s underlying net income, which excludes non-GAAP items, increased 82% to $116.3 million, or $0.54 per share, compared to $63.8 million, or $0.29 per share, in the prior-year quarter. The underlying net income growth was driven by higher net sales, lower cost of goods sold per hectoliter, and lower marketing, general and administrative expenses.

The company’s adjusted EBITDA increased 14% to $325.4 million, compared to $285 million in the first quarter of 2022. The adjusted EBITDA margin improved 140 basis points to 13.9%, compared to 12.5% in the same period last year. The adjusted EBITDA growth and margin expansion were driven by higher net sales, favorable pricing and mix, lower cost of goods sold per hectoliter, and lower marketing, general and administrative expenses as a percentage of net sales.

Conclusion

The company’s CEO, Gavin Hattersley, expressed his confidence in the company’s performance and progress in executing its revitalization plan. He highlighted the net sales growth across all segments, the margin expansion, the earnings growth, and the free cash flow generation as positive indicators of the company’s momentum. He also emphasized the company’s focus on expanding beyond beer into new categories and occasions, such as hard seltzers, hard coffee, canned cocktails, non-alcoholic beverages, and cannabis-infused beverages.

The company’s CFO, Tracey Joubert, provided details on the financial results, including the favorable pricing and mix across all segments, the lower cost of goods sold per hectoliter driven by productivity savings and favorable commodities hedging, and the lower marketing, general and administrative expenses due to timing shifts and cost discipline. She also discussed the capital allocation priorities, which include investing in growth initiatives, repurchasing shares under its $1 billion authorization program, paying down debt to achieve its target leverage ratio, and maintaining its dividend policy.

Broadly what rests to see is the impact of inflation and supply chain disruptions on margins and pricing strategy, the competitive landscape and market share trends in hard seltzers and other categories, the innovation pipeline and launch plans for new products and brands, the recovery outlook for the on-premise channel and international markets, and the cyberattack incident recovery status and estimated costs.

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