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US: Legg Mason lowers Molson Coors estimates

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Legg Mason has lowered its 2005 earnings per share estimates for the brewer Molson Coors to US$4.28 from US$4.97.

In a research note, Legg Mason analyst Mark Swartzberg said: "We met with Molson Coors CFO Tim Wolf last week, seeking to understand if the outlook is as poor as the shares' recent selloff suggests.

"We continue to believe the recently completed Molson Coors merger provides significant cost synergies."

He added: "However, we also recommend against buy-and-hold investing around current levels as the sell-off seems directionally appropriate given the company's outlook in its three most important regions. For example, the company's largest profit centre, Canada, is experiencing volume declines and is expected to see added profit weakness from increased marketing investment and a perceived need to substantially narrow Molson Canadian's retail price gap versus value brands.
 
"Relatedly, we believe a large portion of merger synergies may need to be reinvested, contrary to management's continued statements that they are to be delivered to the bottom line."


Sectors: Beer & cider

Companies: Molson Coors

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