Market Overview

Molson Coors and Other UBS Beer Stock Picks

Recent research by analysts at UBS shows that wholesalers of alcoholic beverages are positive about the prospects for volume growth of their products. Sales of alcoholic beverages continue to be strong both domestically and overseas.

Three beer brewers made the UBS list of stock picks Anheuser-Busch InBev (NYSE: BUD), Boston Beer (NYSE: SAM) and Molson Coors Brewing (NYSE: TAP). Below is a quick look at how these three stocks have fared and what analysts expect from them.

Other picks on the UBS list of wine and spirits stocks include Beam (NYSE: BEAM), Brown-Forman (NYSE: BF-B), Constellation Brands (NYSE: STZ) and Diageo (NYSE: DEO).

Anheuser-Busch InBev

The world's largest brewer sports a market capitalization of almost $159 billion and it is headquartered in Leuven, Belgium. Its dividend yield is about two percent. Note that the long-term earnings per share (EPS) growth forecast is less than seven percent, though the return on equity is more than 18 percent. The price-to-earnings (P/E) ratio is higher than the industry average, but so is the operating margin.

The short interest in Anheuser-Busch was about 0.3 percent of the float as of the April 15 settlement date, despite rising more than 14 percent in the previous month. That was the second highest number of shares sold short since October. Days to cover remains less than two.

Four of the eight analysts that follow the stock and were polled by Thomson/First Call rate the stock at Strong Buy, and three others also recommend buying shares. The mean price target, or where the analysts expect the share price to go, represents more than 13 percent potential upside. That target would be a new multiyear high.

Shares have retreated almost seven percent from the recent multiyear high, but they are still more than 13 percent higher than six months ago. Over that time, the stock has outperformed the broader markets but underperformed Boston Beer.

Boston Beer

This maker of Sam Adams beers and other beverages has a market cap of nearly $2 billion, but it does not offer a dividend. Its long-term EPS growth forecast is about 10 percent, but the P/E ratio is higher than the industry average. The return on equity is more than 27 percent. Boston Beer fell short of consensus EPS estimates in yesterday's first-quarter report.

The short interest in Boston Beer was about 19 percent of the float in the middle of April. The number of shares sold short has been decreasing since October and is now the lowest in at least a year. But note that days to cover is still more than 20, and it has been in all but one period so far this year.

Just one of the seven analysts surveyed recommends buying shares, while four of them rate the stock at Underperform. The share price currently is higher than the mean price target, meaning the analysts on average see no upside potential at this time. For what it is worth, the street-high target is almost 10 percent higher than the current share price.

The share price is more than 52 percent higher than at the beginning of the year, despite pulling back more than nine percent following the disappointing earnings report. Over the past six months, the stock has outperformed larger competitors Anheuser-Busch and Molson Coors, as well as the broader markets.

Molson Coors Brewing

This maker and distributor of beer and other beverage products is headquartered in Denver, and it has a market cap of more than $9 billion and a dividend yield near 2.5 percent. The long-term EPS growth forecast is less than five percent and the return on equity is less than six percent. The P/E ratio is less than the industry average. Revenue for the most recent quarter is expected to be 24 percent higher year-over-year.

The number of Molson Coors shares sold short as of mid-April represented about two percent of the total float. That was lowest level of short interest since July of last year. And the days to cover dropped to less than two in the most recent period.

Only two of the 10 polled analysts recommend buying shares. The consensus recommendation has been to hold shares for at least the past three months. The share price has overrun the mean price target, meaning that analysts on average see no upside potential at this time. But a positive earnings surprise in next week's report could change that.

The share price is about 17 percent higher year-to-date, despite pulling back almost four percent from a recent multiyear high. The stock has outperformed larger rival Anheuser-Busch and the broader markets over the past six months.

Posted-In: Anheuser-Busch Beam boston beer Brown-Forman Constellation BrandsLong Ideas Short Ideas Trading Ideas Best of Benzinga

 

Related Articles (BUD + BEAM)

Around the Web, We're Loving...

Partner Network

Get Benzinga's Newsletters