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Beer company Molson Coors (NYSE:TAP) announced better-than-expected results in Q2 CY2024, with revenue flat year on year at $3.25 billion. It made a non-GAAP profit of $1.92 per share, improving from its profit of $1.78 per share in the same quarter last year.
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Molson Coors (TAP) Q2 CY2024 Highlights:
- Revenue: $3.25 billion vs analyst estimates of $3.18 billion (2.2% beat)
- EPS (non-GAAP): $1.92 vs analyst estimates of $1.68 (14% beat)
- Gross Margin (GAAP): 40.9%, up from 37.3% in the same quarter last year
- Free Cash Flow of $690 million is up from -$187.6 million in the previous quarter
- Sales Volumes fell 4.1% year on year (2.8% in the same quarter last year)
- Market Capitalization: $10.84 billion
Beverages and AlcoholThese companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the explosion of alcoholic craft beer drinks or the steady decline of non-alcoholic sugary sodas. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.
Sales GrowthMolson Coors is one of the larger consumer staples companies and benefits from a well-known brand, giving it customer mindshare and influence over purchasing decisions.
As you can see below, the company's annualized revenue growth rate of 6.5% over the last three years was mediocre for a consumer staples business.
This quarter, Molson Coors's revenue fell 0.4% year on year to $3.25 billion but beat Wall Street's estimates by 2.2%. Looking ahead, Wall Street expects revenue to decline 2.3% over the next 12 months, a deceleration from this quarter.
Volume Growth Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
Molson Coors's quarterly sales volumes have, on average, stayed about the same over the last two years. This stability is normal because the quantity demanded for consumer staples products typically doesn't see much volatility.
In Molson Coors's Q2 2024, sales volumes dropped 4.1% year on year. This result was a reversal from the 2.8% year-on-year increase it posted 12 months ago. A one quarter hiccup shouldn't deter you from investing in a business. We'll be monitoring the company to see how things progress.
Key Takeaways from Molson Coors's Q2 ResultsIt was good to see Molson Coors beat analysts' gross margin expectations this quarter. We were also glad its revenue outperformed Wall Street's estimates. Overall, we think this was a strong quarter that should satisfy shareholders. The stock traded up 2.7% to $52.50 immediately following the results.
