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Investing.com - Citi has reduced its price target on Molson Coors (NYSE:TAP) to $51.00 from $56.00 while maintaining a Neutral rating on the stock. Currently trading at $49.33, the stock sits near its 52-week low of $46.94, though InvestingPro analysis suggests the company is undervalued based on its Fair Value assessment.
The price target adjustment comes as Citi expects Molson Coors to face continued pressure on its topline performance during the second quarter of 2025. The firm cites ongoing softness in the beer category as one of several factors contributing to the challenging outlook. Despite these concerns, the company maintains a "GOOD" overall financial health score according to InvestingPro analysis, with strong profitability metrics including a 39% gross profit margin.
Molson Coors is cycling against approximately 350,000 hectoliters of overshipment that occurred in the second quarter of 2024, ahead of last year’s Fort Worth brewery strike. Citi estimates that less than half of this volume was due to normal seasonal inventory building.
The brewer faces additional headwinds from the termination of contract brewing arrangements with Pabst and Labatt, which Citi projects will create approximately a 3.5 percentage point drag on Americas volumes in the second quarter. The firm estimates about 570,000 hectoliters of the total 1.9 million hectoliters will come out of the system during this period.
These challenges will be partially offset by an estimated 1.6 percentage point volume contribution from Fever-Tree, for which Molson Coors secured exclusive U.S. commercialization rights beginning February 1, 2025. The company’s regional craft brewery divestitures from the third quarter of 2024 are expected to have a relatively smaller impact compared to the contract brewing termination. Worth noting is the company’s strong dividend profile, having maintained payments for 51 consecutive years with a current yield of 3.8%. For deeper insights into Molson Coors’ financial health and growth prospects, including 10+ additional ProTips and comprehensive valuation metrics, check out the full analysis on InvestingPro.
In other recent news, Molson Coors has faced a series of analyst downgrades and price target reductions. BofA Securities downgraded the stock from Buy to Neutral, citing persistent declines in the U.S. beer industry, and adjusted the price target to $50. Piper Sandler also lowered its price target to $53, highlighting a 5% decline in Molson Coors’ second-quarter U.S. retail volumes and rising aluminum prices as cost pressures. UBS revised its price target to $59 after Molson Coors reported first-quarter earnings per share of $0.50, missing estimates and prompting a downward revision of full-year guidance. Citi followed suit by cutting its price target to $56, noting a 10.4% drop in local currency sales and expressing skepticism about the company’s revised guidance for 2025. Despite these challenges, analysts maintain a Neutral rating on Molson Coors, reflecting cautious optimism amid a challenging market environment.
In contrast, Piper Sandler sees potential in Keurig Dr Pepper (NASDAQ:KDP) and Celsius Holdings (NASDAQ:CELH) as they approach their second-quarter earnings. Keurig Dr Pepper is noted for strong momentum in its U.S. refreshment beverages segment, with retail sales growth of 4.4% quarter-to-date. Celsius Holdings is also showing improvement, with its brand experiencing 1.5% retail sales growth in Q2 2025 to date and 6.7% growth in the latest four weeks. Meanwhile, Coca-Cola (NYSE:KO) faces headwinds from declining restaurant traffic, but its fairlife brand shows robust growth with a 27.0% increase in U.S. measured retail sales. These developments highlight the varied performance across the beverage industry, reflecting both challenges and opportunities for investors.
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