Molson Coors Beverage Company TAP is currently trading at a notable low price-to-earnings (P/E) multiple, well below the averages of the Zacks Beverages - Alcohol industry and the broader Consumer Staples sector. With a forward 12-month P/E of 10.41x, TAP stock reflects a discount to the industry average of 15.97x and the Consumer Staples sector’s average of 17.84x.
TAP Stock Looks Undervalued
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This shows the TAP stock is undervalued relative to its industry peers, presenting an attractive opportunity for investors seeking exposure to the Consumer Staples sector. Furthermore, TAP's Value Score of B underscores its appeal as a potential investment.
TAP has demonstrated remarkable performance in the last three months, gaining 9% compared to the industry’s 8.1% decline. The company’s revitalization plan, along with the premiumization of its portfolio, has helped it outperform the broader sector, which fell 3.7% during the same period.
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Technical indicators are supportive of TAP’s strong performance. The stock is trading above both its 50- and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength implies positive market perception and confidence in Molson Coors’ financial health and prospects.
TAP Trading Above 50- and 200-Day Moving Average
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Molson Coors' Strategy for Sustainable Growth
Molson Coors is advancing its revitalization plan to drive sustainable top-line growth by streamlining operations and reinvesting in its brands. The strategy focuses on bolstering iconic brands, expanding in the above-premium beer segment and exploring adjacencies and beyond-beer opportunities. Additionally, the company is enhancing digital capabilities across the commercial, supply chain and employee functions while maintaining strong support for its core portfolio.
The company remains committed to growing its market share through innovation and premiumization. To accelerate portfolio premiumization, the company has been aggressively growing its above-premium portfolio for the past few years. The company has been prioritizing the stabilization of some of its larger above-premium brands in the United States while exploring significant growth opportunities for key brands.
Molson Coors has launched a multiyear project in the U.K. to expand brewing and packaging capacity, driven by the success of its Madri brand. Strong performance in the EMEA & APAC region, along with robust results in Canada within the Americas segment, further highlights the company’s growth potential.
Driven by strong U.S. performance, Coors Banquet grew 8%, leading top 15 beer volume growth. In Canada, Coors Light dominated the light beer market, with above-premium revenue up 15%. EMEA & APAC excelled, with Madri up 15% and the Cobra acquisition boosting its premium portfolio.
TAP’s Estimates Show Uptrend
Indicating the positive sentiment surrounding TAP, the Zacks Consensus Estimate for earnings per share has seen upward revisions. In the past 30 days, analysts have increased their estimates for the current and the next fiscal year by 1.2% to $5.78 and 2.7% to $5.98 per share, respectively. These estimates indicate year-over-year growth rates of 6.45% and 3.42%, respectively.
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Current Pressures on TAP
Molson Coors’ Americas business, which comprises operations in the United States and Canada, has been reeling under the pressures of the tough macroeconomic conditions in the United States. This has significantly impacted the U.S. beer industry and the company’s U.S. financial volumes during this year's peak selling season.
The macroeconomic pressures, combined with the unfavorable shipment timings and the wind-down of a contract brewing agreement, resulted in a 17.9% decline in U.S. financial volumes and a 6.2% drop in brand volumes, reflecting last year’s strong growth comparison and weaker above-premium performance. As a result, Americas segment sales fell 11% year over year, further impacted by currency headwinds.
Due to the ongoing impacts of the macroeconomic challenges on the U.S. beer industry and its effect on the company’s U.S. volumes during this year’s peak selling season, management revised its 2024 net sales revenue guidance from low single-digit growth to a decline of approximately 1%.
Investment Opinion on TAP
Molson Coors' stock appears appealing to investors due to its undervaluation relative to industry peers. The company's strong performance in the EMEA & APAC regions, along with solid results in Canada, presents a growth opportunity. However, challenges like tough macroeconomic conditions in the United States and a decline in U.S. financial volumes during the peak season may signal caution for short-term investors. Despite this, those with a long-term perspective may find value in holding this Zacks Rank #3 (Hold) stock.
Three Stocks Showing Potential
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Ingredion INGR, Freshpet, Inc. FRPT and Vita Coco Company COCO.
Ingredion is a solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients. It currently sports a Zacks Rank #1 (Strong Buy). INGR has a trailing four-quarter earnings surprise of 9.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ingredion’s current financial-year EPS indicates growth of 12.5% from the year-ago reported numbers.
Freshpet, together with its subsidiaries, manufactures, distributes and markets natural fresh meals and treats for dogs and cats, currently carrying a Zacks Rank of 2 (Buy). FRPT delivered an earnings surprise of 144.5% in the last reported quarter.
The Zacks Consensus Estimate for Freshpet’s current fiscal year’s sales and earnings implies growth of 27.3% and 224.3%, respectively, from the year-ago reported number.
Vita Coco develops, markets and distributes coconut water products under the Vita Coco brand name in the United States, Canada, Europe, the Middle East, Africa and the Asia Pacific. The company currently has a Zacks Rank of 2. COCO has a trailing four-quarter earnings surprise of 17.6%, on average.
The Zacks Consensus Estimate for COCO’s current financial-year sales and earnings suggests growth of 3.5% and 29.7%, respectively, from the year-ago reported figures.
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