Will Molson Coors Brewing (TAP) Stock be Hurt by Analyst Downgrade?

NEW YORK (TheStreet) -- Molson Coors Brewing (TAP) shares are up 0.92% to $73.85 in pre-market trading on Tuesday despite being downgraded to "neutral" from "buy" by analysts at Nomura today. 

The firm also lowered the company's price target to $74 from $82.

The firm believes that the U.S. beer market is dwindling with U.S. volumes and pricing trends likely to worsen in the near term.

The firm also said that it has trimmed its expectations of a buyout of the company's MillerCoors joint venture.

TheStreet Ratings team rates MOLSON COORS BREWING CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate MOLSON COORS BREWING CO (TAP) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.45, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.40 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 43.30% is the gross profit margin for MOLSON COORS BREWING CO which we consider to be strong. Regardless of TAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.58% trails the industry average.
  • MOLSON COORS BREWING CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, MOLSON COORS BREWING CO reported lower earnings of $2.75 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($3.85 versus $2.75).
  • TAP, with its decline in revenue, slightly underperformed the industry average of 5.2%. Since the same quarter one year prior, revenues fell by 14.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, TAP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: TAP Ratings Report

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