Molson Coors Reports Mixed Q3 Results Amid Market Challenges

Molson Coors Beverage Company (TAP) released its third-quarter 2024 results, showing both positive and negative trends. While the company topped Zacks Consensus Estimates for earnings and sales, figures decreased compared to the previous year. The decline primarily reflects the tough U.S. economic climate, shipment timing issues, and the ending of a contract brewing agreement. Notably, U.S. financial volume plummeted by 17.9% year over year, though strong performances in the EMEA&APAC and Canada segments helped mitigate some losses.

The adjusted earnings came in at $1.80 per share, down 6.2% from last year but ahead of the Zacks Consensus Estimate of $1.65.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Net sales dropped by 7.8% year-over-year, reaching $3.04 billion, but still managed to surpass the Zacks Consensus Estimate of $3.14 billion. This decline was attributed to lower financial volume, although an improved pricing and sales mix provided some offset.

Following this news, shares of Molson Coors fell 1% in pre-market trading on November 7, 2024. The declines in sales and EPS, combined with a lowered sales forecast for 2024, contributed to investor concerns. Nevertheless, the stock has increased by 6.9% over the past three months, compared to the industry’s 1.7% decline.

Image Source: Zacks Investment Research

Insights into Q3 Performance

Molson Coors experienced a 12.3% decline in financial volumes compared to last year, largely due to reduced shipments from contract brewing in the Americas. Brand volumes also dipped 4.4% overall, with the Americas down 5.4% and EMEA&APAC 1.8% lower.

Despite these challenges, net sales benefited from a 4.5% increase in the price and sales mix, reflecting improvements in pricing and product mix across both regions, even as contract brewing volumes fell in the U.S.

Gross profit decreased by 10.7% year over year to $1.2 billion, with the gross margin contracting 130 basis points to 39.5% during this period.

Marketing, general and administrative (MG&A) expenses fell by 8.3% year over year to $684.7 million, reflecting lower incentive compensation and marketing expenditures as compared to last year. Underlying MG&A expenses also declined by 8.4% in constant currency terms.

Underlying earnings before taxes (EBT) dropped a significant 39.1% year-over-year to $331.4 million, with constant-currency figures showing an 8.7% decline due to lower financial volume and material cost inflation. However, higher pricing, reduced MG&A costs, and a better sales mix partially alleviated these pressures.

Molson Coors Beverage Company Price, Consensus and EPS Surprise

Molson Coors Beverage Company price-consensus-eps-surprise-chart | Molson Coors Beverage Company Quote

Segment Performance Breakdown

Americas: Net sales in this segment fell by 11% year over year to $2.3 billion, reflecting a 10.7% decline in constant currency. Lower financial volume and negative currency effects drove the decrease, though a favorable price and sales mix offered some relief.

Financial volumes in the Americas dropped 15.6%, impacted by the timing of shipments and reduced demand in a struggling market. Brand volumes fell by 5.4%, primarily due to a 6.2% decrease in the U.S., along with challenges in sustaining previous year’s growth rates. However, an additional trading day and favorable holiday timing partially offset these losses, while brand volumes in Canada grew by 3.9% due to the success of the above-premium portfolio. Pricing and sales mix improved, up 4.9% due to higher net pricing.

Underlying EBT was down 14.7% in constant currency, reaching $419.8 million reported, influenced by lower financial volumes and cost pressures. Positive aspects included net pricing increases and effective cost-saving measures.

EMEA&APAC: This segment experienced a 5.1% increase in net sales to $704.4 million (up 3.8% in constant currency), benefiting from improved pricing and a better sales mix, even as financial volumes declined. Enhanced pricing strategies and a favorable mix contributed to a 6.8% increase in the sales mix.

Both financial and brand volumes in this segment fell, impacted mainly by low demand in Western Europe and aggressive competitor promotions. Nonetheless, the underlying EBT surged by 41.8% year over year to $98 million on a reported basis and 40.5% in constant currency, driven by better net pricing and sales mix despite a drop in volume.

Financial Position Overview

At the end of Q3, Molson Coors had cash and cash equivalents totaling $1.02 billion. The company reported a total debt of $6.2 billion as of September 30, 2024, giving a net debt of $5.22 billion.

For the first nine months of 2024, net cash from operating activities was $1.4 billion, while underlying free cash flow reached $856 million. Share repurchases totaled $437.4 million as part of the program initiated on September 29, 2023, with dividends amounting to $279.4 million during this timeframe.

For 2024, capital expenditures are projected at $750 million (with a 5% margin), while the underlying free cash flow expectation is $1.2 billion, plus or minus 10%.

Future Outlook for Molson Coors

In response to ongoing macroeconomic challenges affecting the U.S. beer industry, Molson Coors has revised its 2024 sales forecast to a 1% decline in constant-currency terms. This is a shift from their previous expectation of low-single-digit growth. Despite this adjustment, the company maintains its underlying EBT outlook, thanks to better packaging material and transportation cost expectations.

Molson Coors is targeting mid-single-digit growth for its underlying EPS, which it now expects to reach the higher end of this range, aided by an accelerated share repurchase initiative.

Final projections for underlying depreciation and amortization will continue to be updated as the year progresses.