It is the end of another era as Denver stalwart, Coors brewing company, a regional division of Molson Coors (TAP), reports its last quarter of standalone earnings (Tuesday, August 5th).
A joint venture between SABMiller and Coors, called MillerCoors, now handles all US operations.
Credit Suisse is bullish on TAP Q2 earnings and expects weakened competition to benefit Molson Coors:
We believe the underlying strong trends of 1Q will continue into this quarter. In the U.S., we believe there has been no underlying change in the momentum of the Coors business. With imports slowing, A-B’s lukewarm results and SABMiller’s weak numbers per the trading statement, we expect Coors trends to again be strong. If costs do mute profit results, we believe this provides even more positive rationale for the JV.
Does Miller’s weakness concern Credit Suisse? Nope:
Miller was never expected to bring a great brand portfolio to the JV just as Coors was not expected to bring breweries. It is Miller’s brewery footprint and Coors brand portfolio which form the core of MillerCoors’ strength; Miller’s absolute volume growth outlook was never bright: it is the stated strategy to allow sub-premiums to fall off in exchange for gaining higher margin volumes in super-premiums.
The decline in Milwaukee’s Best (-5.5%) and the rapid growth of the worthmore brands (+8.1%) this quarter represents the execution of a strategy that is already well known and one we think will bear more fruit over time. On whole, with the disruption at A-B, we believe the execution risk for MillerCoors has now decreased from our original expectations. This is positive for TAP.
Credit Suisse maintains OUTPERFORM on Molson Coors (TAP), target $65.
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