Analysis - Molson Coors pleases market despite familiar woes
Molson Coors released its Q2 results yesterday
The Q2 & H1 results are in for Molson Coors and its US JV MillerCoors and the verdict is a familiar one. As in the past few quarters, sales for premium light lagers were down in North America despite promotional campaigns and innovations such as Miller Lite’s Original Can and Coors Light Summer Brew.
The marketing efforts did succeed in slowing Q2 losses for Coors Light in Canada, as highlighted by Molson Coors' Canada head in a call with analysts yesterday. But according to analyst Mark Swartzberg from Stifel, trends for the brand worsened in the US, offsetting improving trends for Miller Lite.
Outside light lagers in the US and Canada, however, yesterday's first-half results, which saw profits rise on flat sales, were positive from a shareholders view, which is why Molson Coors' stock jumped by as much as 6.5% yesterday, reportedly the biggest on the day's S&P 500 index.
Coors Light more than doubled volumes in Mexico and Latin America on top of strong growth last year, and volumes “grew significantly” in India, the company reported. In the US, so-called “above premium” brands Redd's, Leinenkugel Summer Shandy, Smith & Forge Hard Cider and Miller Fortune all won volume and market share growth.
Swartzberg said sales were in line with expectations while margins beat estimates in all regions.
Another reason for investor interest in Molson Coors' shares is ongoing suggestions from analysts that the company is in a good position to take full control of MillerCoors if SABMiller is bought out by Anheuser-Busch InBev. Nomura's Ian Shackleton said such a deal would add “material value” to Molson, while Swartzberg said it could replace the company spending an estimated US$500m on a share repurchase plan.
However, Shackleton warned that the chances of an A-B InBev swoop for SABMiller in the next year currently stood at, in his opinion, 50/50. In Las Vegas, those would be considered short odds. In the alcohol industry, however, it means there's still some way to go before we can expect a done deal.
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