Will Molson Coors (TAP) Beat Earnings Estimates? - Analyst Blog

Molson Coors Brewing Co. TAP is set to report first-quarter 2014 results before the opening bell on May 7. Last quarter, this beverage company posted a negative surprise of 4.23%. Let's see how things are shaping up prior to the announcement.

Factors to Consider This Quarter

We are encouraged by the fact that the company is consistently generating a mid-single-digit percentage of sales growth owing to product innovation. The company's above-premium brand portfolio is growing at a double-digit rate globally, which is also appealing. The company is also on track with its cost savings program and cash generation targets. Molson Coors has also made substantial progress in paying down its debt in 2013 with respect to the loan taken for the acquisition of StarBev (in Jun 2012), which in turn should lower interest costs and thereby improve profitability.

However, Molson Coors has been posting negative beer volumes in the U.S. and Canada for quite some time due to weak consumer demand due to a difficult consumer spending environment. In 2013, beer volumes declined in Canada, U.S. and Europe, primarily due to declines in the overall alcohol market. We believe that the company will witness declining volumes in major markets in the first quarter as well.

Though the company has been spending on marketing and advertising to increase brand awareness, there has been no consistent improvement in volumes. The company is also hoping that the gradual recovery of the U.S. economy and the acquisition of the StarBev business will boost volumes. However, it seems that the company will continue to face significant macroeconomic and promotional challenges in the near term. Slow recovery of the U.S. economy and an unfavorable European economy are also likely to drag the company's performance in the upcoming quarters.

Earnings Whispers?

Our proven model does not conclusively show that Molson Coors is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:The Expected Surprise Prediction or ESP for Molson Coors is 0.00% as both the Zacks Consensus Estimate and Most Accurate Estimate stand at 36 cents per share.

Zacks Rank #2 (Buy):Molson Coors' has a Zacks Rank #2. However, the favorable rank when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Other stocks in the consumer staples sector that have both a positive earnings ESP and a favorable Zacks Rank are:

Treehouse Foods Inc. THS, with an Earnings ESP of +1.25% and a Zacks Rank #2.

General Mills, Inc. GIS, with an Earnings ESP of +2.86% and a Zacks Rank #3 (Hold).

Estee Lauder Companies Inc. EL, with an Earnings ESP of +2.22% and a Zacks Rank #3