Citi raises Molson Coors stock rating, lifts target to $57

On Wednesday, Citi analyst Filippo Falorni upgraded Molson Coors (NYSE:TAP) stock rating from Sell to Neutral and increased the price target to $57, up from the previous $47. The adjustment follows a period of anticipated slowdown in market share and top-line growth for the company, as it faced the aftermath of the 2023 Bud Light controversy. According to InvestingPro data, the company maintains a GOOD financial health score, with strong fundamentals supporting its market position.

Falorni noted that Molson Coors’ share trends have declined year-over-year in the last ten months, contrasting with the gains experienced in 2023. Additionally, the company’s U.S. volumes have seen a high-single-digit percentage decrease recently, in line with a general softness in the U.S. beer category. Despite these challenges, the analyst pointed out that the market share comparisons for Molson Coors are expected to become more favorable in the spring. The company’s resilience is evident in its 50-year track record of maintaining dividend payments, with management actively supporting shareholder value through aggressive share buybacks.

Looking forward to the warmer months, the beer category is projected to cycle easier comparisons, with a 2.8% volume decline from April to September serving as a benchmark. Falorni also highlighted Molson Coors’ margin delivery and share repurchases as factors likely to support earnings per share (EPS) and enable the company to aim for a high-single-digit percentage EPS growth in 2025.

The upgrade comes after Molson Coors’ shares experienced a 20.8% decline over the last ten months. Citi’s revised stance is also influenced by the company’s valuation, which is currently at a peer-low of approximately 9 times the calendar year 2025 price-to-earnings ratio. This valuation, combined with the anticipated improvements in market share and EPS, contributed to Citi’s decision to move to a Neutral rating and set a higher price target for Molson Coors.

In other recent news, Molson Coors has been the subject of various analyst actions and has reported significant changes in its financial performance. BofA Securities upgraded the company’s stock to Buy, predicting a stable recovery for the beer industry by 2025, and increased the price target to $70.00. BofA forecasts that cost inflation will be manageable for Molson Coors and anticipates strong free cash flow and moderate debt leverage, which should enable continued share repurchases.

Similarly, Wells Fargo (NYSE:WFC) upgraded Molson Coors’ stock from Underweight to Overweight, with a significant price target increase to $74. The analyst expects growth in earnings before interest and taxes (EBIT), averaging just a 0.5% increase over the next three years, and foresees a potential "summer of beer" in 2025.

However, HSBC downgraded Molson Coors’ stock from Hold to Reduce, lowering the price target to $50.00 due to the lack of volume growth in major brands, particularly Blue Moon. CFRA also downgraded the company’s stock from a Strong Buy to a Hold, lowering the price target to $57.00 after Molson Coors revised its top line guidance downward due to macroeconomic challenges in the U.S.

These recent developments follow Molson Coors’ third-quarter earnings call, where the company reported a decline in net sales and volumes but reaffirmed its commitment to mid-single-digit growth for underlying pre-tax income and earnings per share. The company also highlighted its progress in premiumization and non-alcoholic beverages, particularly with its increased stake in Zoa to 51%.

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