Molson Coors Brewing Co. (TAP) is set to report third-quarter 2014 results before the opening bell on Nov 6. Last quarter, this beverage company posted a positive surprise of 9.03%. Let’s see how things are shaping up prior to the announcement.
Factors to Consider This Quarter
Molson Coors has struggled hard in the past one year owing to weak consumer demand in the face of macro-economic headwinds. The company is suffering from weak sales volume in its major markets, Canada, the U.S. and Europe.
In Europe, beer volumes have been falling due to declines in the overall alcohol market, while in the U.S., the company is witnessing volume declines, partially due to relatively weak economic conditions.
The premium beer segment in Canada has been gradually losing volume to the above premium and value segments, mainly due to an aging population and a sluggish economy. The substantial excise tax increase in Québec in Aug 2014 has also hurt volumes of retail beers as the company holds a significant share of the Québec market. The loss of the Modelo brands in Canada due to the termination of the joint venture at the end of Feb 2014 also led to volume declines in the second quarter of 2014.
Though the company has been spending on marketing and advertising to increase brand awareness, there has been no consistent improvement in volumes. In fact, the company continues to anticipate volume declines in the second half of 2014 due to the loss of Modelo brands. Other expected headwinds in the second half include the Québec excise tax increase and unfavorable foreign currency versus last year.
Earnings Whispers?
Our proven model does not conclusively show that Molson Coors is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: ESP for Molson Coors is -0.67% as the Zacks Consensus Estimate of $1.50 per share is higher than the Most Accurate estimate of $1.49.
Zacks Rank #4 (Sell): We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks in the consumer staples sector that have both a positive earnings ESP and a favorable Zacks Rank and are therefore worth considering include:
Sanderson Farms, Inc. (SAFM) with an Earnings ESP of +9.00% and a Zacks Rank #2 (Buy).
The J. M. Smucker Co. (SJM) with an Earnings ESP of +1.21% and a Zacks Rank #3 (Hold).
Coca-Cola FEMSA S.A.B de C.V. (KOF) with an Earnings ESP of +2.22% and a Zacks Rank #3.
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