Can Molson Coors' Strategies Outrun Inflation Woes in Q2?

Molson Coors Beverage Company TAP is expected to register top and bottom-line declines when it reports second-quarter 2024 earnings on Aug 6, before market open. The Zacks Consensus Estimate for the company's second-quarter revenues is pegged at $3.2 billion, suggesting a 2.7% decline from the prior-year period's reported figure.

The consensus mark for earnings has moved down by a penny in the past seven days to $1.68 per share, indicating a decline of 5.6% from the year-ago reported figure.

In the last reported quarter, this leading alcohol company delivered an earnings surprise of 33.8%. It has recorded an earnings surprise of 18.7%, on average, in the trailing four quarters.

Key Factors to Note

Molson Coors has exhibited robust brand strength and success across its geographic segments, historically contributing to sales growth. The company's market share gains, driven by innovation and premiumization, have further bolstered its performance.

By expanding its portfolio with higher-margin, above-premium products like Simply Spiked Lemonade, Molson Coors has positioned itself to capitalize on growing consumer demand for premium beverages. Strategic investments in core brands and market share expansion are expected to have positively contributed to the top line in the to-be-reported quarter.

Molson Coors has been progressing well with its revitalization plan, aimed at achieving sustainable top-line growth by streamlining the organization and reinvesting in its brands and capabilities. The company has been focused on investing in iconic brands and exploring growth opportunities in the above-premium beer segment, while expanding into adjacent markets and beyond beer, without compromising support for its existing major brands. The progress made under this plan is expected to have favorably influenced Molson Coors' second-quarter performance.

Additionally, Molson Coors has been enhancing its digital capabilities across commercial functions, supply-chain systems, and workforce training. The company's top line is expected to have benefited from pricing actions implemented to navigate the inflationary environment.

Molson Coors' ongoing cost-saving initiatives, which focus on streamlining operations and reducing overheads, are expected to support financial health and allow for greater reinvestment in key marketing and sales activities. These efforts are anticipated to contribute to margin expansion in the to-be-reported quarter.

However, the company has been facing challenges, including cost inflation for raw materials and manufacturing expenses, as well as an unfavorable product mix. In the last reported quarter's earnings call, management expected inflationary pressures on COGS to persist into the second quarter. Additionally, the softness in the overall beer industry has been concerning.

Zacks Model

Our proven model does not conclusively predict an earnings beat for Molson Coors this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

Molson Coors currently has a Zacks Rank #3 and an Earnings ESP of -1.29%.

Stocks With the Favorable Combination

Here are three companies that, per our model, have the right combination of elements to post an earnings beat:

Vital Farms VITL has an Earnings ESP of +1.18% and currently flaunts a Zacks Rank #1. VITL is anticipated to register top and bottom-line growth when it reports second-quarter 2024 results. The Zacks Consensus Estimate for VITL's quarterly revenues is pegged at $143.8 million, indicating growth of 35% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Vital Farms' earnings has moved down by a penny in the past 30 days to 21 cents per share. The consensus estimate suggests 40% growth from the prior-year quarter's reported figure. VITL has delivered an earnings surprise of 102.1%, on average, in the trailing four quarters.

Coty COTY currently has an Earnings ESP of +22.73% and a Zacks Rank #3. The company is expected to register top and bottom-line growth when it reports second-quarter 2024 numbers. The Zacks Consensus Estimate for COTY's quarterly revenues is pegged at $1.4 billion, which suggests a rise of 1.8% from the prior-year quarter's reported figure.

The Zacks Consensus Estimate for COTY's quarterly earnings has been unchanged in the past 30 days at 5 cents per share. The estimate indicates a 400% gain from the year-ago reported quarter. COTY has delivered a negative earnings surprise of 22.2%, on average, in the trailing four quarters.

Freshpet FRPT has an Earnings ESP of +132.13% and a Zacks Rank #3 at present. FRPT is likely to register top and bottom-line growth when it releases second-quarter 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $230.9 million, which implies a rise of 26% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Freshpet's bottom line has been unchanged at a loss per share of 9 cents in the past seven days. The estimate has significantly narrowed from a loss of 35 cents per share reported in the year-ago quarter. FRPT has delivered an earnings surprise of 118.2%, on average, in the trailing four quarters.

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