Molson Coors Brewing Co. TAP is set to report third-quarter 2015 results before the opening bell on Nov 2. Last quarter, this beverage company posted a positive earnings surprise of 6.02%. It should be noted that the company posted two positive and two negative surprises in the last four quarters, bringing the average to a negative earnings surprise of 1.90%.
Let’s see how things are shaping up prior to the announcement.
Factors to Consider
Molson Coors has been struggling with weak volumes in the major markets of Canada, the U.S. and Europe over the past several quarters. Despite modest recovery in the macroeconomic scenario, the company witnessed double-digit year-over-year decline in earnings and revenues in both the first and second quarters of 2015 due to lower volumes and unfavorable foreign currency movements. These negatives are likely to hurt results in the third quarter as well.
While the overall alcohol market decline is hurting beer volumes in Europe, the weak economic conditions are partially responsible for lowering volumes in the U.S. The premium beer segment in Canada has been persistently losing volume to the above-premium and value segments, mainly because of an aging population and sluggish economy. A tax increase in Québec is also hurting Canada volumes. The termination of business contracts in the U.K. and Canada also had a negative impact on sales. We believe that these factors will hurt volumes and earnings in the to-be-reported quarter.
Nevertheless, the company’s cost-savings initiatives, continuous focus on brand building and increased marketing investments should have a positive impact on the third-quarter results, in our view.
Earnings Whispers
Our proven model does not conclusively show that Molson Coors is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP for Molson Coors is 0.00% as both the Zacks Consensus Estimate and the Most Accurate estimate stand are pegged at $1.29.
Zacks Rank: Molson Coors has a Zacks Rank #4 (Sell).
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some consumer staple companies, which are worth considering, as our model shows that they have the right combination of these two elements:
Campbell Soup Company CPB, with an Earnings ESP of +2.63% and a Zacks Rank #3 (Hold).
Dean Foods Company DF, with an Earnings ESP of +4.00% and a Zacks Rank #3.
Omega Protein Corp. OME, with an Earnings ESP of +9.09% and a Zacks Rank #3.
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