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

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Morningstar’s Analysis

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Molson Coors Shows Slow but Steady Progress in Q2, but Market Impatient; Shares Undervalued

Analyst Note

| Nicholas Johnson, CFA |

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.

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Company Profile

Business Description

Molson Coors is the fifth- largest beer producer globally, boasting top-two positioning in the U.S., Canada, and many Central European markets. It brews and markets a slew of company-owned brands including Blue Moon, Coors, Miller, Vizzy, and Staropramen. It also sells various partner brands in certain locales such as Topo Chico (licensed from Coca-Cola), Amstel and Dos Equis in Canada (through an exclusive import/license arrangement with Heineken) and Corona in Central Europe (through an agreement with Anheuser-Busch InBev). The firm's go-to-market approach differs by geography as well, primarily using independent distributors in the U.S., but deploying hybrid models in Canada and Europe.

NH353, P.O. Box 4030
Golden, CO, 80401
T +1 303 279-6565
Sector Consumer Defensive
Industry Beverages - Brewers
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Slow Growth
Employees 17,000