Molson Coors Brewing (TAP) Beats Consensus

Molson Coors Brewing Co. (TAP) registered second-quarter pro forma earnings (excluding certain one-time items) of $1.25 per share, exceeding the Zacks Consensus Estimate of $1.19 by 5% and year-ago earnings of $1.11 by 12.6%. The better-than-expected results came in the wake of net sales growth, increased equity income from MillerCoors, favorable currency translation and a lower effective tax rate, partially offset by higher marketing and administrative expenses.

On a reported basis, earnings (including one-time items) for the quarter jumped 25.7% to $1.27 per share compared with $1.01 per share in the year-ago quarter. The spike was on the back of higher pro forma net income and a mark-to-market gain on the company’s Foster’s-related swap.

Net sales recorded a growth of 10.6% to $883.3 million from $798.9 million in the year-ago quarter. Revenues also surpassed the Zacks Consensus Estimate of $874 million.

In terms of segments, sales grew 15.0% in Canada to $541.8 million, 3.5% in the U.K. to $320.5 million and 15.4% in the International and Corporate segment to $21.0 million, compared with $471.0 million, $309.7 million and $18.2 million, respectively, in the year-ago quarter.

Overall beer volumes slipped 0.7% year over year to 13.4 million hectoliters. The company’s Canadian segment volumes grew 2.6% to 2.46 million hectoliters, while the U.K. segment was essentially flat at 2.49 million hectoliters.

Molson Coors’ gross profit rose 11.5% to $408.5 million in the quarter compared with $366.3 million in the prior-year quarter. During the quarter, Molson achieved $16 million of cost savings as part of its second Resources for Growth (RFG2) cost savings program.

Molson Coors ended the quarter with cash and cash equivalents of $798.6 million, compared with $734.2 million at the end of fiscal 2009. The company has long-term debt of $1,433.3 million in the quarter.

Molson’s healthy balance sheet and cost saving programs support its investment in brands and innovation ensuring that the company is well established to capitalize on growth opportunities and economic improvement. However, the high unemployment rate and slow global recovery continue to be major headwinds for the company.

Based in Denver, Colorado, Molson Coors Brewing shares maintain a Zacks #4 Rank, which translates into a short-term Sell recommendation. Our long-term recommendation for the stock remains Underperform.

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