Molson Coors Beverage ( NYSE: TAP ) was the S&P’s greatest decliner on Tuesday as analysts offered negative assessments of its Q2 earnings results.
While headline results for the brewer were essentially in-line with analyst expectations, a steep rise in the cost of goods sold that accelerated faster than price increases and an over 8% drop in depletions across North America increased pessimism on the results. A labor strike in Québec was noted as a particular headwind across the company’s Canadian sales.
Morgan Stanley analyst Dara Mohsenian noted that the recent run-up for the stock is likely exacerbating the slide for the stock on Tuesday, but that below consensus sales in the US and Canada understandably prompted the negative stock reaction. He added that a 410 basis point miss on profits and below-consensus gross margins build more negativity into the print.
Mohsenian reiterated a Hold-equivalent rating on the stock and a $51 price target on shares, still below Tuesday’s share price even after its sizable tumble.
Bank of America analyst Bryan Spillane added that the company’s guidance is likely overoptimistic, setting the company up to disappoint. He noted that the guidance anticipates a significant increase in profitability despite significant cost headwinds that are expected to persist into the coming months.
“We maintain our Underperform rating and $47 PO that is based on 10.8x our FY23E EPS,” Spillane concluded. “At 10.8x we value TAP shares at a discount to beverage alcohol peers given the challenge to grow beer volumes and sales within a struggling industry.”
Molson Coors ( TAP ) stock fell 10.14% on Tuesday, erasing gains marked in the past month.
Read more on the key details of the brewer’s earnings release .
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Molson Coors stock crashes as analysts assess earnings disappointment