[ad_1]
Not credited
Text size
Molson Coors Brewing
may need to increase its spending to stabilize its market share, which could hurt earnings and delay any increase in its dividend, Bank of America Merrill Lynch said Monday, lowering two notches its rating on the stock to underperform.
Shares closed down 1.2% to $ 53.71.
The story back. The shareholders of Molson Coors (Ticker: TAP) have not had much to celebrate lately. The stock is down more than 6% since the beginning of the year, while the
S & P 500
has increased by more than 20%. In the last 12 months, equities have lost more than 21%.
The company has been battling headwinds affecting many of its peers in the consumer staples sector, such as changes in the retail sector, currency fluctuations and pricing concerns. Data showing that legalized cannabis reduces demand for beer is an additional challenge.
What's up. Monday, analyst of the Bank of America Bryan Spillane Molson Coors downgraded its Buy performance against underperformance and lowered its price target by $ 20 to $ 50. He writes that while the company has well integrated its MillerCoors and Miller International acquisitions in terms of costs and cash flow, sales are still lagging.
In addition, competition in the beer sector has become more expensive, he said, prompting many companies to reduce their profit ambitions as they try to boost growth. This is a trend we have seen elsewhere in consumer products.
The company said it was in a quiet period before the publication of its results next month and that she was not commenting on analysts' research.
Look to the front. Molson Coors will need to increase spending to stabilize the market share of its core brands, while investing in its premium brands and non-beer businesses, Spillane said. While this may "be a long-term fit for the company, we see it as a drag on the stock in the short term," he wrote, pointing out that this could limit earnings growth for the years. 2019 and 2020.
The company may not have much choice, he says, since key brands like Coors Light and Blue Moon are declining faster than the beer category as a whole, and that competition options such as canned wine and seltzer is becoming more and more lively.
"In absolute dollars, competitors such as
Anheuser-Busch InBev
(BUD),
Heineken
(HEINY), from Mike,
Constellation Brands
(STZ) and
Boston beer
(SAM) have increased marketing / brand support behind new products, packaging and marketing, "says the analyst.
If Molson Coors increases its own investments, sacrificing profit growth this year and the next to gain market share, says Spillane, the company may also have to extend its schedule to meet its debt reduction targets. It could also delay any increase in the dividend, he said.
Write to Teresa Rivas at [email protected]
[ad_2]
Source link