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

    Fortinet: A Great Play on Cybersecurity

    Discover how a healthy product mix, large-business deal growth and the boom of the cybersecurity industry are all driving Fortinet profits.
  2. Stock Analysis

    2 Catalysts Driving Intrexon to All-Time Highs

    Examine some of the main reasons for Intrexon stock tripling in price between 2014 and 2015, and consider the company's future prospects.
  3. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  4. Charts & Patterns

    Understand How Square Works before the IPO

    Square is reported to have filed for an IPO. For interested investors wondering how the company makes money, Investopedia takes a look at its business.
  5. Technical Indicators

    4 Ways to Find a Penny Stock Worth Millions

    Thinking of trading in risky penny stocks? Use this checklist to find bargains, not scams.
  6. Professionals

    Chinese Slowdown Affects Iron Ore Market

    The Chinese economy's ongoing slowdown is having a major impact on iron ore demand.
  7. Investing Basics

    Why do Debt to Equity Ratios Vary From Industry to Industry?

    Obtain a better understanding of the debt/equity ratio, and learn why this fundamental financial metric varies significantly between industries.
  8. Investing

    Factors Driving Kroger's Success

    Kroger’s focus on optimizing customer experience and cultivating its own product lines has proven to be successful strategy.
  9. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  10. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
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!