Goldman Sachs Is Incrementally More Positive On Molson Coors & Constellation Brands: Here's Why

Zinger Key Points
  • Goldman Sachs analyst upgrades Molson Coors Beverage from Neutral to Buy.
  • The analyst sees enough momentum in Constellation Brands business driven by its core beer brands.
  • Bonnie Herzog lowers price target of Boston Beer as distributors are continuing to trim their inventory.

Goldman Sachs analyst Bonnie Herzog is incrementally more positive on Molson Coors Beverage Co TAPConstellation Brands Inc STZ and incrementally negative on Boston Beer Company Inc SAM based on feedback from the beer distributor contacts in the recent Beverage Bytes survey.

The analyst upgraded the shares of Molson Coors Beverage from Neutral to Buy and raised the price target from $66 to $75.

The analyst sees a positive risk/reward given the distributors expect TAP to be a big winner of spring shelf resets, gaining an incremental mid-single-digit percentage of shelf space on average.

More distributors reported share gains strengthening for Miller Lite & Coors Light with nearly 80% of distributors expecting the brands to be able to hold onto their share gains, notes the analyst.

The analyst notes 78% of distributors had more inventory of TAP brands in March, which suggests TAP may have shipped even more than anticipated in first-quarter ahead of spring resets.

The analyst expects a first-quarter beat for TAP, reflecting an improved outlook on shipment/depletion growth in the Americas.

The analyst expects the stock to re-rate higher as TAP's market share tailwinds prove more sustainable than the market currently appreciates.

The analyst reiterates a Buy rating on the shares of Constellation Brands with a price target of $290, ahead of its fourth-quarter results on April 11.

The analyst sees a potential top & bottom line beat based on positive feedback suggesting STZ's beer volume trends remain robust with the brand poised to be the biggest winner of incremental shelf/cooler space this spring.

The analyst's bullish view is also supported by the long runway of growth ahead for Modelo given strong underlying consumer demand, favorable demographic trends, strong and clear brand positioning.

STZ’s powerful innovation is expected to drive up to 40% of its volume growth over the next 5 years, up from 30% historically, notes the analyst.

The analyst continues to see enough momentum in STZ's business to deliver attractive growth driven by its core beer brands led by Modelo. STZ remains one of the top stock picks for analyst.

The analyst reiterates a Sell rating on the shares of Boston Beer and lowers the price target from $257 to $250.

According to the analyst, distributors report momentum starting to slow for Twisted Tea in the last few months as new competitors flood the hard tea category. 

Despite an upbeat outlook for Twisted Tea, the analyst notes that the risk-reward for SAM still largely skews negative, given uncertainty about whether Twisted will be enough to offset Truly's losses.

The analyst notes that distributors are continuing to trim their inventory of SAM products and expect retailers to allocate less shelf/cooler space during the spring resets.

Hence, the analyst lowers 1Q24/FY24/FY25 EPS estimates by -$0.28/-$0.58/-$0.46 to $0.11/$9.72/$12.63.

The analyst sees a more negative risk/reward for the stock near-term until there are more signs of a sustained topline turnaround story.

Price Action: SAM shares are trading lower by 1.01% at $293.99 on the last check Tuesday.

Photo via Shutterstock

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