Wednesday, Citi has downgraded shares of Molson Coors (NYSE:TAP) from Neutral to Sell, adjusting the price target to $56 from the previous $66. The downgrade follows concerns about the company's ability to replicate its exceptional performance from the previous year. In 2023, Molson Coors experienced significant gains in U.S. market share for its Coors Light and Miller Lite brands, which were attributed to the Bud Light controversy that began in mid-April 2023.
The company has expressed confidence in the first quarter trends and expects favorable outcomes from spring shelf space resets. However, Citi points out the challenges Molson Coors may face in duplicating a year that delivered what the company described as six years' worth of profit growth. Early April scanner data has shown a downturn in sales and volume trends for Molson Coors' beer brands, a situation that is anticipated to persist as year-over-year comparisons become increasingly challenging.
Additionally, Molson Coors is expected to cycle out of the substantial benefits it reaped from fixed cost leverage on margins. Despite the company's stock valuation being low at approximately 11.5 times the estimated CY24E P/E, it is noted to be near the ~12 times average of the last four years. This proximity to the historical average valuation has contributed to the decision to lower the stock's price target and issue a Sell rating.
InvestingPro Insights
Amid the downgrade by Citi, current metrics from InvestingPro show a nuanced picture for Molson Coors (NYSE:TAP). The company boasts a market capitalization of $13.63 billion and a P/E ratio that stands at 15.55, with an adjusted P/E ratio for the last twelve months as of Q4 2023 at a slightly lower 12.83. This indicates a valuation that is in line with the historical average, as noted by Citi, but it also reflects a company that is not excessively priced relative to its earnings.
InvestingPro Tips reveal that Molson Coors has a track record of raising its dividend, with three consecutive years of increases and a maintained dividend payment streak for 50 years, showcasing a commitment to shareholder returns. Additionally, with 8 analysts revising their earnings upwards for the upcoming period, there is an implied confidence in the company's potential to perform well. However, it's worth noting that short-term obligations exceed liquid assets, which could present liquidity challenges.
For readers looking to delve deeper into the financial health and future prospects of Molson Coors, InvestingPro offers additional insights. With an InvestingPro subscription, users can access a comprehensive array of tips and metrics to inform their investment decisions. As a special offer, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 6 more InvestingPro Tips available for Molson Coors that can provide further clarity on the company's financial standing and market potential.
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