Credit Suisse: Be Cautious On Molson Coors Multiples Following EPS Change

Molson Coors Brewing Co TAP's top-line growth opportunities appear limited by “the current brand portfolio and geographic footprint,” and there seems to be “little upside” to management’s announced synergy target, Credit Suisse’s Laurent Grandet said in a report. He initiated coverage of the company with a Neutral rating and a price target of $106.

Grandet believes the stock is not “as cheap as it may appear,” given the recent changes in how the company calculates EPS.

Acquisition Does Not Solve Anything

Grandet noted that the MillerCoors acquisition would not add significantly to either Molson Coors’ brand portfolio or its geographic footprint. He pointed out that MillerCoors’ US retail portfolio had contracted at a compound annual rate of 1 percent since 2012, and this trend may not fully reverse.

Also, there’s limited upside to the synergy target, “which seems to be a key element of the bull thesis on the stock,” the analyst mentioned.

Saying that the stock was currently trading broadly in-line with its historical average, Grandet commented, “We could become more constructive if the company takes more decisive action to improve the mix of the portfolio that would help drive margins higher.”

At last check, shares of Molson Coors Brewing were down 1.04 percent at $96.60.