Four Beverage Companies Susquehanna Analysts Are Changing Targets At

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In a report published Tuesday, Pablo Zuanic of Susquehanna Financial Group issued price target changes on shares four beverage companies:
Molson Coors Brewing CompanyTAP
,
Monster Beverage CorpMNST
,
PepsiCo, Inc.PEP
and
SodaStream International Ltd
SODAMolson Coors: Attractive Valuation
Zuanic maintained a Positive rating on shares of Molson Coors with a price target lowered to $90 from a previous $97. According to Zuanic, Molson Coors' sales trends (excluding foreign exchange) in the first quarter were below expectations, but profit margins were higher than expected. The company also noted continued foreign exchange headwinds and loss of contracts in the UK (Corona distribution, Heineken co-packing) and in Canada (Corona and Miller distribution). Despite the headwinds, the analyst stated that shares are trading at 11.5x CY16 EBITDA and 18x PE, which is "attractive" among brewers. In addition, a favorable outlook comes from the "collateral benefits" for Molson Coors resulting from the global beer industry's ongoing consolidation.
Monster Beverage: Shares Are ‘Expensive' Relative To Growth
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Zuanic maintained a Neutral rating on shares of Monster Beverage with a price target lowered to $122 from a previous $127. According to Zuanic, shares of Monster Beverage are "expensive" given the current nine to ten percent underlying volume growth. The current valuation (CY16 20x EBITDA and 35x PE) implies "rosy" expectations for a doubling of volume growth, an outcome in which the analyst is "skeptical" given the "complexities" of dealing with the global network of
The Coca-Cola coKO
bottlers. With that said, the analyst noted that he sees "more downside than upside."
PepsiCo: Positive On Fundamentals
Zuanic maintained a Positive rating on shares of Pepsi with a price target lowered to $116 from a previous $123. According to the analyst, Pepsi's beat in its recent quarterly print was all tax driven and the company's earnings per share guidance was cut due to foreign exchange. At the same time, Pepsi showed no volume acceleration as the "dichotomy" between "lackluster" trends in drinks and solid snacks results continued. Looking forward, Zuanic noted that the Aspartame move is "risky" and could hurt CSD sales. However, his positive stance is based on valuation as shares are trading at 12.4x CY16 EV/EBITDA, and 19.5x PE.
SodaStream: Revisiting Initial Assumptions
Zuanic maintained a Positive rating on shares of SodaStream with a price target raised to $27 from a previous $24. According to Zuanic, when he initially launched coverage of shares, he made the argument that valuation SodaStream's overseas business (75 percent of sales, all of earnings in 2014) at 9x EBITDA one year forward would value shares at $24 (taking zero value for the US unit), representing a premium to the consensus 8x EBITDA CY16 multiple the Street is estimating. Zuanic continued that SodaStream's international business grew sales by nine percent in 2014 (nine percent including foreign exchange) and 23 percent in 2013. With that said, SodaStream's problems were mainly US centric and the analyst's 9x multiple captures a lack of growth in the international market (a trend seen over the past three quarter), even though margin expansion may be slower than expected.
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Posted In: Analyst ColorAnalyst RatingsAspertameBeerBrewersColaCoorsEnergy BeverageMolsonPablo ZuanicSusquehanna Financial Group
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