On Friday, Piper Sandler adjusted its outlook on Molson Coors (NYSE: NYSE:TAP) shares, reducing the price target to $57 from $69, while keeping a Neutral rating on the stock.
The adjustment follows a reassessment of the company’s performance, taking into account a weaker-than-anticipated retail momentum in the United States and the impact of the lost Pabst contract brewing, which is expected to affect the Americas segment's performance in the second quarter of 2024.
The financial institution has also factored in the effects of Molson Coors' recent debt refinancing. Although the refinancing was executed at favorable rates of 3.8%, it is anticipated to lead to a net increase in interest expenses. This is due to the expectation that more debt would have been paid down, as opposed to the reality of the refinancing terms.
In light of these developments, Piper Sandler has revised its earnings per share (EPS) estimates for Molson Coors. For the year 2024, the EPS forecast has been lowered from $5.75 to $5.50.
This includes a partial offset by a $0.14 benefit from increased share buybacks. Similarly, the 2025 EPS estimate has been decreased from $6.00 to $5.70, with a $0.23 lift factored in from additional buybacks.
The revision of the price target from $69 to $57 reflects a change in the valuation multiple from approximately 11.5 times to about 10 times earnings, indicating a more conservative view of the company's growth prospects. This new valuation is based on the revised earnings projections and the updated assessment of Molson Coors' financial situation.
In other recent news, Molson Coors Beverage Company has seen a flurry of activity from financial institutions. Jefferies has reduced its price target for the company from $61.00 to $57.00, maintaining a Hold rating. JPMorgan also lowered its price target to $54, expressing concerns about the company's volume.
Edward Jones has sustained its Hold rating on Molson Coors, highlighting the company's valuation as a key factor. Meanwhile, Citi reduced its price target for Molson Coors from $56.00 to $53.00, indicating a cautious stance due to recent sales downturns.
The company reported robust growth in its first quarter, with a 10% increase in net sales revenue and a nearly 69% rise in pre-tax income. Core brands like Coors Light, Coors Banquet, and Miller Lite have seen double-digit volume growth. However, JPMorgan revised its second-quarter earnings per share (EPS) estimate for Molson Coors to $1.63, a slight decrease from the earlier forecast of $1.67.
Despite the price target adjustments, Molson Coors remains hopeful about achieving growth in 2024, backed by its strong performance in core and high-end brands. The company's future expectations are underpinned by its recent developments and the analysis provided by institutions like Jefferies, JPMorgan, Edward Jones, and Citi.
InvestingPro Insights
In the wake of Piper Sandler's revised outlook on Molson Coors, current data from InvestingPro offers additional context for investors considering the beverage company's stocks. With a market capitalization of $11.27 billion, Molson Coors is trading at an attractive P/E ratio of 12.18, which is even more appealing when considering the adjusted P/E ratio for the last twelve months as of Q1 2023 at 9.45. This suggests that the company is valued favorably compared to its earnings. Additionally, the dividend yield stands at 3.32%, which is notable for income-focused investors, especially since the company has a history of raising its dividend for the past three consecutive years.
InvestingPro Tips highlight the company's strong free cash flow yield and its low earnings multiple, which may appeal to value investors. Moreover, Molson Coors has demonstrated a commitment to returning value to shareholders, maintaining dividend payments for an impressive 50 consecutive years. For those looking for more in-depth analysis and additional InvestingPro Tips, there are 7 more tips available that could further guide investment decisions. Investors interested in these insights can use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
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