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Factors Likely to Impact Molson Coors' (TAP) Q3 Earnings

Molson Coors Beverage Company TAP is expected to register top-line growth when it reports third-quarter 2021 earnings on Oct 28. The Zacks Consensus Estimate for the company’s September-quarter revenues is pegged at $2.86 billion, suggesting 3.9% growth from the prior-year period’s reported figure.

For third-quarter earnings, the consensus mark is pegged at $1.55 per share, suggesting a 4.3% decline from $1.62 reported in the year-ago quarter. The consensus mark has moved 1.9% south in the past 30 days.

In the last reported quarter, the leading alcohol company delivered an earnings surprise of 14.5%. It recorded an earnings surprise of 32.8%, on average, in the trailing four quarters.

Key Factors to Note

Molson Coors has been witnessing cost inflation, unfavorable brand and channel mix as well as increased inventory for a while. The company on its last earnings call noted that the cost inflation stemming from higher transportation and packaging materials costs persisted in the third quarter as well.

It also predicted significant growth in marketing spends from the year-ago quarter’s reported levels through the rest of the year due to higher marketing investments in core brands and new innovations. It expects third-quarter marketing investments to be higher than the second-quarter 2021 reading as well as the third-quarter 2020 tally. This is likely to have partly dented its bottom line in third-quarter 2021.

However, gains from its revitalization plan, product innovation and premiumization efforts, strength in iconic core brands as well as the hard seltzer ambition bode well.

The company’s revitalization plan aims at achieving sustainable top-line growth by streamlining the organization and reinvesting resources into its brands and capabilities. As part of this plan, it has been investing in iconic brands and growth opportunities in the above-premium beer space, expanding in adjacencies and beyond beer, and creating digital competencies for commercial functions, supply-chain-related system capabilities and employees. These investments are expected to have aided the company’s third-quarter performance. Favorable net pricing and cost savings are also likely to have been key drivers.

The company’s innovation and premiumization efforts as well as its hard seltzer ambition are expected to have led to continued market share growth in the third quarter. In a bid to accelerate portfolio premiumization, it has been aggressively growing its above-premium portfolio in the past few years.

The company is also witnessing continued growth on the back of the entire lineup of hemp-derived CBD beverages and the fast-evolving RTD cocktails. Such endeavors are likely to have provided some cushion to third-quarter results.

Zacks Model

Our proven model does not conclusively predict an earnings beat for Molson Coors this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Molson Coors has a Zacks Rank #4 and an Earnings ESP of -3.72%.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to beat on earnings this reporting cycle:

The Coca-Cola Company KO has an Earnings ESP of +0.75% and a Zacks Rank #3, presently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tyson Foods TSN currently has an Earnings ESP of +19.13% and a Zacks Rank of 3.

Hormel Foods Corporation HRL has an Earnings ESP of +1.59% and is Zacks #3 Ranked at present.

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