Can Molson Coors (TAP) Counter Headwinds With Cost Savings?

Shares of Molson Coors Brewing Company (NYSE:TAP) have underperformed both the Zacks categorized Beverages–Alcoholic industry and the broader sector on a year-to-date basis, primarily due to continued decline in volumes and sluggish results since past two quarters. The stock declined 2.1% against the industry’s gain of 12.7%. Meanwhile, the Zacks categorized Consumer Staples sector, of which they are part of, gained 10.7%.

Let’s Delve Deeper

Molson Coors began 2017 on a dismal note and also posted lower-than-expected results for the second straight when it posted first-quarter 2017 results. In fact, a glimpse of the company’s past performance reveals that its earnings have missed the Zacks Consensus Estimate in three of the trailing four quarters, with an average miss of 22.6%. Also, its sales lagged the same in four of the past seven quarters.

Moreover, its sales and earnings declined year over year in the first quarter. While earnings were hurt by higher brand amortization expense, mix shift to higher-cost products and weaker volumes in the U.S. in the quarter, sales were affected by currency headwinds and soft sales in Europe and the U.S.

Notably, Molson Coors has been posting negative beer volumes in the U.S. and Canada for quite some time. In the U.S., the company witnessed declines due to declining labor participation rates and lower consumer confidence. Though economic conditions improved slightly, competition from outside the beer category remained challenging for the industry. In the first quarter, both the U.S. domestic sales-to-retailers volume (STRs) and domestic sales-to-wholesalers volume (STWs) declined 2% and 4%, respectively.

However, the Zacks Consensus Estimate of $2.10 for the second quarter remained stable over the last 30 days. Moving ahead, difficult economy and competitive pressure along with lower volumes and significant currency headwinds continues to remain major concerns.

On the contrary, Molson Coors has been undertaking restructuring initiatives to reduce overhead costs and boost profitability. Moving ahead, management plans to deliver more than $175 million as cost savings in 2017. Notably, this Zacks Rank #3 (Hold) company boasts a strong portfolio of well-established brands and consistently makes innovations to expand its market share.

Furthermore, the company is expanding global footprint and accelerating its international business through acquisitions. Whether these ongoing initiatives will be able to spark a turnaround in the company’s performance, is a wait-and-watch story.

Stocks that Warrant a Look

Better-ranked stocks in the broader Consumer Staples sector include Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) , Energizer Holdings, Inc. (NYSE:ENR) and Tupperware Brands Corporation (NYSE:TUP) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ollie's Bargain, with a long-term earnings growth rate of 17.1% has surged 56.8% in the last one year.

Energizer Holdings, with a long-term earnings growth rate of 9.8% has posted an average beat of 21.6% in the last four quarters.

Tupperware Brands, with a long-term earnings growth rate of 12% has posted an average beat of 6.6% in the last four quarters.

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