Molson Coors: Is the brewery undervalued?

Molson Coors (TAPX: B) unveils third-quarter earnings weak weak revenue growth while earnings per share increased 17.3% to US $ 1.56.

 

Molson Coors Canada Inc. (TPX-B.TO) last 5 years

On October 31st, Molson Coors shared its third quarter figures with its investors. Its net revenue is up 1.8%. In addition, the increase in financial volumes and revenues per hectolitre is improving. The European market, their second largest production sector in the world, and the Latin American market are growing steadily. Thus, the growth in volumes recorded outside of North America is consistent with their strategy to be the first choice of beer in the world. In contrast, in the United States, the sales volumes were lower than industry average.

For the end of 2018, management reiterates its objective of generating cash flow of 1.5B US$, plus or minus 10 percent, and cost savings of 700M $US from 2017 to 2019

However, according to The WSJ, alcohol consumption in the United States of young people aged 21 to 27 decreased from 65% in 2006 to 43% in 2016. In addition, in 2010 beer accounted for 48.2% of the market, while in 2017 this market share fell to 45.6%. In short, beer consumption is declining in the United States, which is not good news for Molson Coors.

On October 16, Molson Coors Canada and Hexo, a Canadian cannabis company, created a new entity: Truss. This new entity is responsible for developing new cannabis derivatives. Leaders discuss a non-alcoholic cannabis drink. The derived products represent an opportunity to gain market share in the very lucrative cannabis market.

Finally, many people would consider the purchase of Molson, as the Price to Book (P / B) is at its second lowest level in more than five years. As of today (November 25, 2018), the P / B is at 1.004.

MolsonCoors. (31 October 2018) Molson Coors présente ses résultats pour le troisième trimestre de 2018 [Online]. Available http://www.molsoncoors.com/-/media/molson-coors-corporate/news/tap-earnings-release-2018q3-french.ashx?la=fr

Morningstar (21 November 2018). Molson Coors Canada Inc B TPX.B [Online]. Available http://quote.morningstar.ca/Quicktakes/stock/keyratios.aspx?t=TPX.B&region=CAN&culture=en-CA&ops=clear

Zonebourse (31 October 2018) Molson Coors : présente ses résultats pour le troisième trimestre de 2018 [Online]. Available  https://www.zonebourse.com/MOLSON-COORS-BREWING-14548/actualite/Molson-Coors-presente-ses-resultats-pour-le-troisieme-trimestre-de-2018-27518145/

NATASHA BACH (10 May 2018) Big Brewers Take a Hit to the Gut as Americans Move Away From Beer [Online]. Available http://fortune.com/2018/05/10/american-beer-consumption-drops/

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