Molson Coors Lags Q3 Earnings, Revenues on Low Volumes
Global brewer Molson Coors Brewing Company (TAP) posted adjusted earnings of $1.46 per share in the third quarter of 2014, missing the Zacks Consensus Estimate of $1.50 per share by 2.67%. The results declined 3.3% from the prior-year earnings of $1.51 per share and 7% from the preceding quarter earnings of $1.57. The lower earnings resulted from a decline in sales, lower volumes, increased brand investments and higher underlying effective tax rate this year.
Molson Coors Brewing Company - Earnings Surprise | FindTheBest
Revenues and Operating Profits
Net sales, including excise tax, declined a marginal 0.3% year over year to $1.168 billion in the third quarter due to a decline in beer volumes, despite positive pricing and mix. Currency had a neutral impact on overall sales in the quarter. Sales also lagged the Zacks Consensus Estimate of $1.180 billion by 1% and were also lower than the preceding quarter sales of $1.19 billion.
Sales volume declined 3.05% year over year to 8.688 million hectoliters in the third quarter of 2014, which was lower than the preceding quarter volume of 8.726 million hectoliters. Total worldwide beer volume also declined 3.4% year over year to 16.4 million hectoliters, which was lower than 16.6 million hectoliters in the second quarter of 2014.
Underlying (excluding special and other non-core items) pre-tax income declined 1.2% year over year to $331.6 million, due to softness seen in Canada and International regions. Currency had a negative impact of $6.3 million in the third quarter. On a constant currency basis, underlying pre-tax income increased 0.7%.
Segment Details
The company operates through the following geographical segments.
Canada: Molson Coors Canada net sales declined 3.7% to $507.2 million in the quarter due to a 2.2% decline in sales volume. On a constant currency basis, segment sales increased 0.7%.
The segment’s underlying pretax income declined 8.9% to $132.6 million in the quarter due to the loss of the Modelo brands (due to the termination of the Modelo brands joint venture at the end of Feb 2014), higher marketing spending and unfavorable foreign currency, which overshadowed the benefits of cost savings. On a constant currency basis, underlying pretax income decreased 5.7%.
United States (MillerCoors): MillerCoors’ net sales increased 2.2% to $2.2 billion in the second quarter of 2014, while sales volume declined 0.9% in the quarter. MillerCoors’ underlying net income increased 3.5% to $376.7 million driven by stronger pricing, positive sales mix and cost savings. Molson Coors’ underlying U.S. segment equity income increased 2.8% to $159.0 million.
Europe: The segment includes the operations of the U.K. segment combined with the results of operations for Central Europe, excluding the Central Europe global export and license business.
The segment reported net sales growth of 1.8% to $618.7 million in the third quarter of 2014. On a constant currency basis, segment sales declined 2.2%. Sales volume declined 4.6% as parts of Serbia, Bosnia and Croatia were negatively impacted by devastating floods. Weak consumer demand and poor weather conditions also dented sales volume in the quarter.
However, Europe underlying pretax income increased 4.4% to $101.4 million in the quarter, driven by cost savings, positive geographic mix and favorable currency. On a constant currency basis, underlying pretax income decreased 2.3%.
Molson Coors International (MCI): Segment net sales increased 15.1% to $43.4 million in the quarter. On a constant currency basis, segment sales increased 17.5%.
Sales volume including royalty volume increased 22.9% owing to strong Coors Light growth in Latin America, significant growth in India and the addition of the Australia market.
The segment posted an underlying pretax loss of $2.7 million in the third quarter, wider than the $2.1 million loss incurred in the year-ago period due to currency headwinds and higher marketing investments.
Molson Coors has struggled hard since the past year, owing to weak consumer demand in the face of macro-economic headwinds and also in terms of sales volume for the past three years. However, we believe that the company’s initiatives and increased marketing investments in its brands will drive volumes over the long term. But we continue to expect volume declines and economic uncertainty in the near term.
Molson Coors currently holds a Zacks Rank #4 (Sell).
Some better-ranked players worth considering in the consumer staples sector include Post Holdings Inc. (POST), Boston Beer Inc. (SAM) and McCormick & Company, Inc. (MKC). While Post Holding sports a Zacks Rank #1 (Strong Buy), Boston Beer and McCormick hold a Zacks Rank #2 (Buy).
Read the Full Research Report on TAP
Read the Full Research Report on MKC
Read the Full Research Report on POST
Read the Full Research Report on SAM
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