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Will Weak Volumes Hurt Molson Coors' (TAP) Q2 Earnings?

Molson Coors Brewing Co. TAP is set to report second-quarter 2016 results before the opening bell on Aug 2. Last quarter, this beverage company posted a positive earnings surprise of 25.58%. It should be noted that the company has posted three positive and one negative earnings surprise in the last four quarters, resulting in an average positive surprise of 8.80%.

Let’s see how things are shaping up prior to the announcement.

Factors to Consider

We note that Molson Coors has been struggling with weak volumes in the major markets of Canada, the U.S. and Europe over the past several quarters. Despite modest recovery in the macroeconomic scenario, the company witnessed year-over-year decline in earnings and revenues throughout 2015 and in the first quarter 2016 due to lower volumes and unfavorable foreign currency movements. We expect weak volumes to hinder growth in the to-be-reported quarter.

Nevertheless, the company’s cost-savings initiatives, continuous focus on brand building and increased marketing investments should have a positive impact on the second quarter results, in our view.

Further, the company is pinning its hopes on the Anheuser-Busch InBev (BUD) and SABMiller deal, as only then will Molson Coors be able to get full ownership of MillerCoors.

MOLSON COORS-B Price and EPS Surprise

MOLSON COORS-B Price and EPS Surprise | MOLSON COORS-B Quote

Earnings Whispers

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

Zacks ESP:  Earnings ESP for Molson Coors is -2.66% as the Most Accurate estimate of $1.10 per share is lower than the Zacks Consensus Estimate of $1.13.

Zacks Rank: Molson Coors’ Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about a positive surprise.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some consumer staple companies, which are worth considering, as our model shows that they have the right combination of these two elements:

Omega Protein Corp. OME with an Earnings ESP of +2.13% and a Zacks Rank #1.

Tyson Foods, Inc. TSN with an Earnings ESP of +0.94% and a Zacks Rank #3.

Post Holdings, Inc. POST with an Earnings ESP of +12.5% and a Zacks Rank #3.

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MOLSON COORS-B (TAP): Free Stock Analysis Report
 
TYSON FOODS A (TSN): Free Stock Analysis Report
 
OMEGA PROTEIN (OME): Free Stock Analysis Report
 
POST HOLDINGS (POST): Free Stock Analysis Report
 
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