Molson Coors offers a solid yield following its recent 6.8% payout increase, which provides a reasonable income component for existing shareholders. The company’s cost-cutting measures have successfully delivered modest earnings growth despite revenue challenges, demonstrating management’s ability to protect the bottom line in challenging conditions.
But declining volumes, fierce competition, premiumization challenges, and uncertain returns from diversification efforts don’t justify your new buying at present valuations.
Even though the stock trades cheaply at 10.0 times the company’s forward earnings forecast, wait to see if the company’s diversification strategy proves successful in offsetting the challenges to its core beer business.
MOLSON COORS CANADA INC. (Toronto symbols TPX.A and TPX.B; www.molsoncoors.com) is the world’s fifth-largest beer brewer. Its main brands include Molson Canadian (Canada), Coors Light (the U.S.) and Carling (the U.K.).
The company will now raise your quarterly dividend by 6.8% with the March 2025 payment, to $0.47 a share from $0.44 (all figures except share price in U.S. dollars). The new annual rate of $1.88 yields a solid 2.9% for the class B shares.
Late last year, Molson sold four craft breweries—Hop Valley Brewing Company, Terrapin Beer Co., Revolver Brewing and Atwater Brewery—to Tilray Brands (Toronto symbol TLRY). The move allows Molson to focus on larger brands such as Blue Moon and Peroni.
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Under its plan to add non-beer drinks to its portfolio, Molson recently acquired the rights to produce, market and sell Fever-Tree products in the U.S. Based in the U.K, that firm makes a variety of tonics, ginger beers and cocktail mixers. As part of the deal, the company paid $90 million for an 8.5% stake in Fever-Tree’s parent company.
The company is also paying an undisclosed sum for a majority stake in VOA, the energy drink brand co-founded by actor Dwayne “The Rock” Johnson. The purchase is part of Molson’s strategy to offset slowing demand for its main beer brands.
Molson Coors: Modest forward P/E reflects market skepticism about growth
Meantime, in the quarter ended December 31, 2024, sales fell 2.0%, to $2.74 billion from $2.79 billion a year earlier. That beat the consensus forecast of $2.70 billion. Lower volumes (down 6.4%) offset higher prices (up 4.5%).
Without unusual items, earnings rose 4.4%, to $268.6 million from $257.4 million. Due to fewer shares outstanding, per-share earnings gained 9.2%, to $1.30 from $1.19. That also topped the $1.13 consensus estimate.
Molson makes most of its products in their local markets. However, its operations in Canada and
the U.S. rely on ingredients such as wheat and barley that are vulnerable to tariffs. New tariffs on aluminum and other packaging materials would also add to its costs.
Those uncertainties, along with slowing beer consumption, are largely why the stock trades at just 10.0 times the $5.97 U.S. a share that Molson will probably earn in 2025.The company faces increasingly intense competition from larger brewers such as Anheuser-Busch InBev (New York symbol BUD).
Recommendation in The Successful Investor: Molson Coors Canada Inc. is a hold.
