Molson Coors (TAP) to Post Q3 Earnings: What's in the Offing?

Zacks Equity Research
·5-min read

Molson Coors Beverage Company TAP is slated to release third-quarter 2020 results on Oct 29. In the last reported quarter, the leading alcohol company delivered an earnings surprise of 138.5%. Moreover, it delivered an earnings surprise of 47.7%, on average, over the trailing four quarters.

The Zacks Consensus Estimate for the company’s third-quarter earnings is pegged at $1.04, suggesting a 29.7% decline from the year-ago reported figure. The consensus mark has moved downward by a penny in the past seven days. For third-quarter revenues, the consensus mark is pegged at $2.69 billion, suggesting a 5.5% decline from the prior-year reported figure.

Key Factors to Note

Despite the impacts of the coronavirus outbreak on top-line growth, Molson Coors has been benefiting from favorable net pricing, cost savings, and lower marketing, general and administrative (MG&A) expenses. Its diligent cost-saving efforts aided the bottom line in the second quarter. The company’s efforts to prioritize, shift and significantly reduce marketing spend by shifting to media platforms with greater audiences in the current situation have led to cost deleverage, which is expected to have continued in the third quarter.

Further, it suspended on-premise activation spending and eliminated expenses in areas that are significantly impacted like sports and in-market activations. These actions along with contributions from cost savings related to the revitalization plan are likely to get reflected in marketing spending declines in the third quarter, which is expected to have aided the earnings performance.

Molson Coors Beverage Company Price and EPS Surprise

 

Molson Coors Beverage Company Price and EPS Surprise
Molson Coors Beverage Company Price and EPS Surprise

Molson Coors Beverage Company price-eps-surprise | Molson Coors Beverage Company Quote

Additionally, the company’s focus on premiumization and cost savings has been aiding its bottom-line performance. In fact, it remains committed to growing its market share through innovation and premiumization. Moreover, its innovation plans have been focused on introducing flavors and variations for customers. The recently launched brands, including Vizzy Hard Seltzer, Blue Moon LightSky, Saint Archer Gold and Movo canned wine spritzers, are likely to have contributed meaningfully to the third-quarter performance.

However, Molson Coors is expected to have witnessed a slowdown in volumes due to the pandemic-led closure of on-premise channels, which has been a major contributor to sales. While the company has been witnessing an unprecedented strength of demand in the off-premise channel, this has not fully offset the on-premise losses, which is likely to have continued in the third quarter.

Molson Coors has been experiencing shifts in demand to the off-premise and certain package types as well as strained supply chain and package availability. This has led the company to prioritize certain brands and package types to adjust to the changing consumer dynamics, which has been hurting the bottom line.

On its last reported quarter’s earnings call, the company predicted that the disproportionate trends in on-premise and off-premise despite all efforts should continue to hurt sales in the third quarter and beyond. Moreover, it expected the industry-wide supply constraints for cans to remain a headwind for the third quarter.

Additionally, the company expects uncertainty to prevail regarding the return of its business to normalcy, with the growing risk of a return of shutdowns in certain markets. As a result, it predicted significant COVID-19-related adverse impacts on the top and bottom lines for the third quarter. It expects marketing expenses in North America to increase in the second half of 2020 to support the availability of core brands as well as continued investments for growth of Vizzy and Blue Moon LightSky as well as the launch of Coors Seltzer in August. Consequently, it anticipated a year-over-year increase in marketing spends for the third quarter.

Zacks Model

Our proven model does not conclusively predict an earnings beat for Molson Coors this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Molson Coors has a Zacks Rank #3 (Hold) and an Earnings ESP of -2.00%.

Stocks With Favorable Combination

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Nu Skin Enterprises, Inc. NUS presently has an Earnings ESP of +3.54% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Kraft Heinz Company KHC currently has an Earnings ESP of +0.80% and a Zacks Rank #3.

Church Dwight Co., Inc. CHD has an Earnings ESP of +1.80% and a Zacks Rank #3 at present.

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