Shares of Molson Coors Beverage (TAP) closed about 2% higher on Thursday after the company reported better-than-expected 2Q earnings results despite disruptions caused by COVID-19 pandemic. Its adjusted EPS increased 2% to $1.55 year-over-year and beat analysts’ estimates of $0.68.
Revenues of $2.5 billion surpassed Street estimates of $2.45 billion but declined 15.1% year-over-year. The alcoholic beverage giant’s top-line results reflected a negative impact from closures of bars and restaurants due to coronavirus-led restrictions. As a result, Molson Coors registered a 12.5% year-over-year drop in volumes.
“Consumer demand has shifted in ways no one could have foreseen six months ago,” commented CEO Gavin Hattersley. “When bars and restaurants were shuttered in the early parts of (the second quarter), demand for kegs in the U.S. went down to zero,” he said, “and conversely demand for cans went through the roof.”
Despite weak volumes, MKM Partners analysts William Kirk reiterated a Buy with a target price of $59 (59% upside potential). Kirk said, “Molson Coors was able to deliver a large earnings beat largely on decreased marketing spend and cost savings (underlying MG&A down 30.8% y/y).
He added “it is clear that the previously disclosed April 2020 performance (North America and Europe brand volume) were the worst numbers during this turbulent period. Given the relative under-performance versus the broader market, we expect Molson Coors to re-rate.”
The stock has plunged near 31% year-to-date. Overall, TAP analysts have a cautiously optimistic Moderate Buy consensus on the stock. The average analyst price target stands at $44.38, implying 18.5% upside potential. (See TAP stock analysis on TipRanks).
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