Molson Coors (NYSE:TAP) counts itself as the second largest brewer in the U.S. and Canada. As a result of its geographic exposure and tough industry conditions, organic sales growth has been hard to come by. A recent acquisition should help move the top-line needle slightly, while other corporate moves could result in slightly higher profit growth over time.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

First Quarter Recap

Net sales growth was minimal at 0.1% as total sales reached $691.4 million. Net sales rose 2.2% to $402.3 million in Canada, fell 4.1% in the U.K. to $263.4 million and jumped 30% to $28.1 million in other international markets. U.S. sales advanced 3% to $2 billion, but aren't reflected in Molson Coor's sales. Instead, it reports results under the equity method of the business, which is known as MillerCoors and jointly owned with SAB Miller. Equity income jumped 17.5% in MillerCoors to $118.9 million. Molson owns 42% of the venture.

SEE: How Buybacks Warp The Price-To-Book Ratio

MillerCoors therefore accounted for the vast majority of Molson's operating income of $121.8 million, which ended up falling 3.3% as the other units were barely profitable on their own. Reported net income fell 4.1% to $79.5 million, but share buybacks kept earnings flat at 44 cents per diluted share.

Outlook and Valuation
Analysts project minimal sales growth of 0.9% for all of 2012 and total sales of nearly $3.5 billion. The consensus profit estimate currently stands at $3.71 per share, with expectations for 4.3% growth in 2013 to $3.87 per share. This puts the forward earnings multiples at approximately 10.8 and 10.3, respectively.

SEE: 5 Must-Have Metrics For Value Investors

The Bottom Line
Molson's existing operations aren't growing very much. This continues a trend of flat beer sales in the vast majority of developed markets across the world. Rivals including Miller and Anheuser-Busch InBev (NYSE:BUD) are in a similar predicament and continue to struggle against the growing share of microbrews, as well as spirit growth from the likes of Beam (NYSE:BEAM) and Brown-Forman (NYSE:BF.A) (NYSE:BF.B).

SEE: Selecting A Second-Tier Company

Molson is looking to acquisitions to grow and on April 3 announced its intent to snap up Central European brewer StarBev and its $953 million in annual sales. M&A activity could help sales grow modestly over time while cost cutting and share buybacks could help profits grow at a slightly higher faster rate over time. Combined with a current dividend yield of 3.3%, investors should be able to drink in modest total shareholder gains over time.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  2. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  3. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  4. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  5. Stock Analysis

    An Auto Stock Alternative to Ford and GM

    If you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
  6. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  7. Stock Analysis

    The Biggest Risks of Investing in Netflix Stock

    Examine the current state of Netflix Inc., and learn about three of the major fundamental risks that the company is currently facing.
  8. Stock Analysis

    What Seagate Gains by Acquiring Dot Hill Systems

    Examine the Seagate acquisition of Dot Hill Systems, and learn what Seagate is looking to gain by acquiring Dot Hill's software technology.
  9. Investing

    Procter & Gamble Restructures, Sheds 100 Brands

    All businesses face adversity, and Procter & Gamble is no exception. We take a look at recent developments affecting this global giant.
  10. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  1. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  2. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  3. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  4. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  5. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  6. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!