Molson Coors (TAP) - Get Free Report, owner of such beer brands as Blue Moon, Miller Genuine Draft and Coors, is on the right track with its revitalization plan, an MKM Partners analyst said, as the company beat Wall Street's fourth-quarter-earnings expectations.
The Denver company's shares at last check were off 3% to $56.31.
"Inflections in a slowly declining industry (volume basis) are rare," analyst Bill Kirk wrote in a note to clients, but Molson Coors, "with improved Coors Light, is on the precipice of such a moment."
Kirk, who has a buy rating on Molson Coors and a price target of $63 a share, said Coors Light makes up about 25% of the company's U.S. portfolio and "has been a consistent low- to mid-single-digit decliner, offsetting any strength of Miller Lite."
"With better Coors Light and Miller Lite volume, fixed-cost deleverage pressure eases and reinvestment flexibility improves," he said.
Molson Coors reported fourth-quarter net income of $163.7 million, or 75 cents a share, more than double the $76 million, or 35 cents a share, of the year-earlier quarter. Adjusted earnings came to $1.02, ahead of the FactSet-survey-derived consensus of 78 cents.
Sales totaled $2.49 billion, up from $2.42 billion a year ago and ahead of the $2.48 billion FactSet consensus.
For full year 2020, which the company considers a transition year, Molson Coors called for sales to range from flat to down low-single digits.
In October, Molson Coors announced a revitalization plan that it said was designed to enable the company "to invest across its portfolio at the level necessary to drive long-term, sustainable success."
"Following the prior quarter's announcement of the 'Revitalization Plan' with an earnings beat gives us confidence that Molson Coors's 2020 guidance is in an appropriately conservative place," Kirk said.
"Given the already strong free cash flow generation, ... the Revitalization Plan carries more reward than it does risk."