Molson Coors Beverage Co Shs -B- Non-Voting TAP

After a few months in the shadows, the bears were out frolicking once again heading into no-moat Molson Coors’ second-quarter earnings release, as the shares were under pressure after hitting 52-week highs in June. The dour backdrop was apparently due to recent syndicated data showing a slowdown in the domestic beer category (most notably the hard seltzer enclave). Ultimately, even when accounting for the very weak comp due to last year’s pandemic trough, the results were solid and ahead of FactSet consensus on both the top and bottom lines. We don’t plan to change our $64 fair value estimate: time value and better-than-expected hedging benefits to gross margins thus far this year will be offset by higher taxes, as we incorporate Morningstar’s probability-weighted view of an increase in the U.S. statutory rate to 26%. While the road to a leaner operation and secularly advantaged portfolio will remain choppy, we continue to believe the brewer is on the right track. Given the recent sell-off, the shares look cheap, and we think this is a compelling entry point for prospective investors.