On Wednesday, Citi reduced its price target on Molson Coors (NYSE:TAP) Beverage Company (NYSE:TAP) shares from $56.00 to $53.00, while reiterating a Sell rating on the stock. The adjustment follows the company's first-quarter earnings report, which revealed a higher-than-expected earnings per share (EPS) of $0.95, surpassing the consensus estimate of $0.74.
Despite this, Molson Coors' recent sales data indicated a downturn, with a decline of 5.3% in sales and a 6.9% drop in volumes over the last two weeks, contributing to a near 10% fall in the company's stock price.
The brewery giant confirmed that it is maintaining its full-year 2024 guidance, expecting low single-digit percentage growth in constant-currency sales and mid single-digit percentage growth in underlying EPS. However, Citi expressed concerns over potential risks to these projections if the negative mid to high single-digit percentage levels in underlying consumption persist.
The bank also noted that the positive impact from overshipment in the first quarter, which accounted for approximately 3.8% net of the previous year's overshipment, is likely to reverse in the second half of 2024.
Citi has revised its 2024 EPS estimate for Molson Coors down to $5.56. The firm's stance remains cautious due to anticipated challenges the company may face in sustaining top-line growth and margins following the first quarter. These challenges include the cycling of benefits from the Bud Light controversy, which Citi had previously cited as a rationale for downgrading the stock to a Sell rating.
InvestingPro Insights
Adding to the analysis provided by Citi, InvestingPro offers additional insights that could be crucial for investors considering Molson Coors Beverage Company. The company's determination to maintain dividend payments, demonstrated by a 3.07% dividend yield and a remarkable track record of maintaining dividend payments for 50 consecutive years, may be a beacon of reliability for income-focused investors. This commitment is further underscored by the company's recent dividend growth of 15.79% over the last twelve months as of Q1 2023.
On the valuation front, Molson Coors is trading at a low earnings multiple, with an adjusted P/E ratio of 11.45, which could suggest the stock is undervalued relative to its earnings. Additionally, the stock's price is hovering near its 52-week low, which, combined with a strong free cash flow yield indicated by its valuation, might present a potential entry point for long-term investors.
However, it's important to note that the company has faced challenges recently, as reflected by a significant price drop over the last week and month. The short-term outlook may be influenced by these trends, and the company's short-term obligations exceeding its liquid assets could pose liquidity risks.
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