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Category: Stock Market and Molson Coors
Date: 12 February 2020 Stock Price: $58.05 We take a look at the 4th quarter earnings report of their 2019 fiscal year of Molson Coors, the brewery group that owns Millers, Coors Light and BlueMoon.
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About Molson Coors
We are one of the world's largest brewers and have a diverse portfolio of owned and partner brands, including global priority brands Blue Moon, Coors Banquet, Coors Light, Miller Genuine Draft, Miller Lite, and Staropramen, regional champion brands Carling, Molson Canadian and other leading country-specific brands, as well as craft and specialty beers such as Creemore Springs, Cobra, Sharp's Doom Bar, Henry's Hard and Leinenkugel's. With centuries of brewing heritage, we craft high-quality, innovative beverages with the purpose of uniting people to celebrate all life’s moments. As a business, our ambition is to be the first choice for our people, our consumers and our customers, and our success depends on our ability to make our products available to meet a wide range of consumer segments and occasions. Molson and Coors were founded in 1786 and 1873, respectively. Our commitment to producing the highest quality beers is a key part of our heritage and remains so to this day. Our brands are designed to appeal to a wide range of consumer tastes, styles and price preferences. Our largest markets are the U.S., Canada and Europe. Coors was incorporated in June 1913 under the laws of the state of Colorado. In October 2003, Coors merged with and into Adolph Coors Company, a Delaware corporation. In February 2005, Adolph Coors Company merged with Molson Inc. ("the Merger"). Upon completion of the Merger, Adolph Coors Company changed its name to Molson Coors Brewing Company. In January 2020, we changed our name from Molson Coors Brewing Company to Molson Coors Beverage Company
Overview of Molson Coors 4th quarter 2019 earnings report
The data below refers to the latest quarter's data (unless specified otherwise)
- Sales: $3.091 billion (down from $3.024 billion for the same quarter of the previous year)
- Sales increased by 2.2% over the last 12 months
- Cost of goods sold: $1.520 billion (down from $1.596 billion for the same quarter of the previous year)
- Cost of goods sold decreased by -4.7% over the last 12 months
- Net income: $163.7 million (up from $76 million for the same quarter of the previous year)
- Diluted earnings per share: $0.75 (up from $0.35 for the same quarter of the previous year)
- PE ratio of Molson Coors: 52.7
- Dividend declared per share: $0.57
- Dividend yield of Molson Coors: 4.9%
- Number of shares in issue: 217 million (unchanged from 216.7 million for the same quarter of the previous year)
- Cash and cash equivalents: $523.4 million
- Cash and cash equivalents per share: $2.41
- Cash and cash equivalents makes up 4.15% of Molson Coors' market capital
- Cash and cash equivalents makes up 1.8% of Molson Coors' total assets
- Accounts receivable: $705.9 million
- Accounts receivable makes up 2.44% of Molson Coors' total assets
- Inventories: $615.9 million
- Inventories makes up 2.13% of Molson Coors' total assets
- Goodwill in Molson Coors: $7.631 billion
- Goodwill per share in Molson Coors: $34.85
- Goodwill makes up 26.44% of Molson Coors total assets
- Stockholders equity in Molson Coors: $13.673 billion
- Stockholders equity per share: $63
- So Molson Coors is trading at 1.08 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at.
Molson Coors (NYSE: TAP) management commentary on 4th quarter 2019 earnings
DENVER & MONTREAL--(BUSINESS WIRE)-- Molson Coors Beverage Company (NYSE: TAP; TSX: TPX) today reported results for the 2019 full year and fourth quarter. Molson Coors president and chief executive officer Gavin Hattersley said:
"Full year 2019 was a challenging year for Molson Coors Beverage Company. However, despite significant headwinds and continued volume declines, we grew NSR/HL and improved our mix, delivered strong free cash flow and cost savings, reduced our debt, and started making progress toward premiumizing and modernizing our portfolio."
Cost Savings Update
"Full year 2019 was a challenging year for Molson Coors Beverage Company. However, despite significant headwinds and continued volume declines, we grew NSR/HL and improved our mix, delivered strong free cash flow and cost savings, reduced our debt, and started making progress toward premiumizing and modernizing our portfolio."
Cost Savings Update
- We delivered full year cost savings of approximately $230 million in 2019, resulting in a total of approximately $725 million delivered over the course of our 2017 - 2019 program. The total savings over this 3 year program of $725 million exceeded the most recent guidance of $700 million and original goal of $550 million.
- Total one-time costs to achieve transaction-related synergies were approximately $31 million in 2019. Total one-time costs to achieve our 2017 - 2019 transaction-related synergies were $208 million, of which approximately 70% was non-core operating expense and 30% was capital spending. Total costs over the 3 year program were approximately $20 million less than our most recent guidance of $230 million and approximately $140 million less than our original expectation of $350 million.
- We are committed to continuing to deliver cost savings across the organization and are constantly evaluating the business to identify areas for additional savings. Our next generation cost savings program, which began in 2020, is currently expected to deliver approximately $600 million over the 3 year program term through 2022 and is focused around many of the same functions of the business as the 2017 - 2019 program. These cost savings include $150 million related to the revitalization plan.
- Total one-time costs to achieve savings from the revitalization plan are expected to be approximately $120 million to $180 million. We began recognizing these costs in the fourth quarter of 2019, and expect the remainder will be spread through the balance of fiscal years 2020 and 2021.
Gavin continued, "We know we have a lot of work still to do. That’s why last quarter we announced a plan to get Molson Coors back to consistent topline growth. The plan is designed to streamline the company, allow us to move faster, and free up resources to invest in our brands and capabilities. As promised in October, we’ve wasted no time in implementing the plan."
We currently expect the following for full year 2020, which we consider a transition year:
We currently expect the following for full year 2020, which we consider a transition year:
- Net Sales Revenue: flat to low-single digit decrease on a constant currency basis.
- Underlying EBITDA: high-single digit decrease from the full year 2019 underlying EBITDA of $2.364 billion, on a constant currency basis.
- Underlying free cash flow: $1.1 billion, plus or minus 10%.
- Capital spending: approximately $700 million, plus or minus 10%.
- Cost savings: approximately $600 million for the 2020 to 2022 program which includes the cost savings associated with the revitalization program.
- Underlying depreciation and amortization: approximately $850 million.
- Consolidated net interest expense: approximately $280 million, plus or minus 5%.
- Underlying effective tax rate in the range of 20% to 24% for 2020 and beyond, which remains subject to additional definitive guidance and finalized regulations from the U.S. government regarding the implementation of the tax reform legislation from 2017.
- Deleverage & Dividend: We intend to maintain our investment grade rating as demonstrated by our continued deleverage. Additionally, our intention is to maintain a dividend payout-ratio target in the range of 20%-25% of trailing annual underlying EBITDA.
Molson Coors (NYSE: TAP) stock price history
The image below obtained from Google, shows the stock price history of Molson Coors over the last 5 years. And its been a horrible time for Molson Coors stockholders. 5 years ago the stock of Molson Coors was trading at around $72.80 a stock and its currently trading at $58.05 a stock. That's a significant loss of -83.4% suffered by Molson Coors stockholders over the last 5 years.
The stock of Molson Coors is trading at closer to its 52 week high of $65.39 than it is to its 52 week low of $49.82 a stock, which to us is a clear indication that the short term sentiment and momentum of Molson Coors stock is positive at this point in time,
The stock of Molson Coors is trading at closer to its 52 week high of $65.39 than it is to its 52 week low of $49.82 a stock, which to us is a clear indication that the short term sentiment and momentum of Molson Coors stock is positive at this point in time,
Recent coverage of Molson Coors
The extract below discusses the latest regarding Molson Coors as obtained from TheStreet.com
Former Attorney General of Louisiana, Charles C. Foti, Jr., Esq., a partner at the law firm of Kahn Swick & Foti, LLC ("KSF"), announces that KSF has commenced an investigation into Molson Coors Brewing Company (TAP)
On February 12, 2019, before the market opened, Molson Coors announced that its "previously issued consolidated financial statements as of and for the years ended December 31, 2017 and December 31, 2016 should be restated and no longer be relied upon" due to errors regarding the acquisition of its remaining interest in MillerCoors, LLC in 4Q16, and that such restatements would "increase its deferred tax liabilities and deferred tax expenses by $399.1 million, with a corresponding decrease in net income and earnings per share."
Thereafter, the Company and certain of its executives were sued in a securities class action lawsuit, charging them with failing to disclose material information during the Class Period, violating federal securities laws, which remains ongoing. KSF's investigation is focusing on whether Molson Coors' officers and/or directors breached their fiduciary duties to Molson Coors shareholders or otherwise violated state or federal laws.
Read the full article here
Former Attorney General of Louisiana, Charles C. Foti, Jr., Esq., a partner at the law firm of Kahn Swick & Foti, LLC ("KSF"), announces that KSF has commenced an investigation into Molson Coors Brewing Company (TAP)
On February 12, 2019, before the market opened, Molson Coors announced that its "previously issued consolidated financial statements as of and for the years ended December 31, 2017 and December 31, 2016 should be restated and no longer be relied upon" due to errors regarding the acquisition of its remaining interest in MillerCoors, LLC in 4Q16, and that such restatements would "increase its deferred tax liabilities and deferred tax expenses by $399.1 million, with a corresponding decrease in net income and earnings per share."
Thereafter, the Company and certain of its executives were sued in a securities class action lawsuit, charging them with failing to disclose material information during the Class Period, violating federal securities laws, which remains ongoing. KSF's investigation is focusing on whether Molson Coors' officers and/or directors breached their fiduciary duties to Molson Coors shareholders or otherwise violated state or federal laws.
Read the full article here
Molson Coors (NYSE: TAP) stock valuation
So what do we value Molson Coors stock at after the release of their 4th quarter 2019 earnings report? Based on Molson Coors' 4th quarter 2019 earnings report our valuation models provides a target price (full value price) for Molson Coors at $64.30 a stock. We therefore believe that the stock of Molson Coors is close to fully valued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $64.30 therefore we believe a good entry point into Molson Coors stock is at $57.80 or below. We expect the stock of Molson Coors to slowly make its way up to our target price (full value price) in coming weeks and months as we believe is slightly undervalued and that their cost savings program will filter through to higher earnings and better valuations in coming reporting quarters.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $64.30 therefore we believe a good entry point into Molson Coors stock is at $57.80 or below. We expect the stock of Molson Coors to slowly make its way up to our target price (full value price) in coming weeks and months as we believe is slightly undervalued and that their cost savings program will filter through to higher earnings and better valuations in coming reporting quarters.
Next earnings release of Molson Coors
It is expected that Molson Coors will publish their 1st quarter 2019 earnings report in early May 2020