Topic: How To Invest

Best Canadian Stocks: Molson Coors rises despite fewer North American beer drinkers

Molson Coors

Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendations on the stocks we profile, with a full explanation of how we arrived at our opinion. Molson Coors is the world’s third largest brewer. Its main brands include Molson Canadian (Canada), Coors Light (the U.S.) and Carling (the U.K.). In October 2016, Molson Coors acquired the remaining 58% of the MillerCoors brewing joint venture from SABMiller for $12 billion (all amounts in U.S. dollars). It now owns 100% of this business.

Overall beer consumption in North America has declined in the past few years, mainly because baby boomers are switching to wine and spirits.


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MOLSON COORS CANADA INC. (Toronto symbols TPX.A and TPX.B; www.molsoncoors.com) is the world’s third largest brewer. Its main brands include Molson Canadian (Canada), Coors Light (the U.S.) and Carling (the U.K.).

In October 2016, Molson Coors acquired the remaining 58% of the MillerCoors brewing joint venture from SABMiller for $12 billion (all amounts in U.S. dollars). It now owns 100% of this business. MillerCoors was formed in 2008, when Molson and SABMiller entered a joint-venture agreement to combine their U.S. brewing operations.

In the quarter ended December 31, 2017, Molson’s sales rose 4.5%, to $2.58 billion from $2.47 billion a year earlier. That fell short of the consensus forecast of $2.59 billion. However, if you factor out the positive impact of currency rates, sales gained 2.4%.

The company earned $133.6 million in the quarter, up 32.1% from $101.1 million. Earnings per share rose 31.9%, to $0.62 from $0.47. That beat the consensus estimate of $0.57.

Profit should further improve as the company’s MillerCoors purchase starts to yield more cost savings. Molson cut $255 million from its annual costs in 2017, which was ahead of its original goal of $175 million. The company now expects to save a total of $600 million annually when it completes the restructuring by the end of 2019.

Those savings will help the brewer pay down its long-term debt of $10.6 billion (as of December 31, 2017). That amount represents a relatively high 44% of Molson Coors’s market cap.

Dividend Stocks:  New contract cuts pension obligations for Molson Coors

In December, 2017 MillerCoors purchased an annuity contract from Athene Annuity and Life Company. As a result, Athene will assume responsibility for pension payments to 6,000 MillerCoors’ retirees. The deal will also cut future pension obligations for this Molson business by $900 million.

The company last raised its quarterly dividend with the February 2015 payment. Investors now receive $0.41 a share for an annual rate of $1.64. The stock yields 2.0% for class A shares and 2.0% for class B shares. Molson’s dividend has grown an average of 5.1% annually over the last 5 years.

The company is expected to earn $5.16 a share in 2018, and its class A shares trade at 20.1 times that estimate (21.1 times for the class B shares).

Investors holding class B shares Molson Coors have less voting power to elect directors than those with class A shares. But the B shares are more liquid and receive the same dividend.

This post was first published in October 2014 and is updated regularly.

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