USA: Molson Coors Brewing Company in hands of analysts

A disappointing first quarter for Molson Coors Brewing Company led several analysts to downgrade the stock and lower 2006 and 2007 earnings estimates, Forbes announced in a Market Scan on May 03.

On Tuesday, Molson Coors reported a first-quarter 2006 loss of 22 cents per share, substantially missing Morgan Stanley's estimate of a 31-cent gain and the consensus estimate of 13 cents per share.

Despite the miss, Morgan analyst William Pecoriello did not change his long-term outlook on the stock. "We continue to believe that Molson Coors can deliver underlying profit growth of 1 to 2% and realize significant cost savings/synergies that should bolster profit growth through 2008," he said in a report on May 02.

However, Banc of America Securities analyst Bryan Spillane downgraded shares of Molson Coors to "neutral" from "buy."

"Rising costs in 2006 could impair Molson Coors' ability to flow cost saves to the bottom line," said Spillane in a report on May 03. "While 2007 prospects could be attractive with a new brewery coming on line and capital spending coming down, more volatility over the next three quarters keeps us from advising fresh money commitments at this time."

The Banc of America analyst lowered his price target on Molson Coors shares to $69 from $74. He also lowered his 2006 and 2007 earnings-per-share estimates to $4.30 and $5.00 from $4.55 and $5.10, respectively.

The Morgan Stanley analyst also lowered 2006 and 2007 earnings-per-share estimates. His outlook goes to $3.79 and $5.26 per share from $4.20 and $5.55 per share, respectively.

Morgan Stanley maintained an "equal-weight" rating on shares of the beer company but lowered the target price on the shares to $78 from $80. Stocks in the beverages sector that Morgan Stanley rates "overweight" are PepsiCo and Dean Foods.

Banc of America's top picks in the beverages sector are PepsiCo, rated "buy" with a $64 price target, and Diageo, rated "buy" with a $70 price target. The firm's least favorite stock in the sector is Cott, rated "neutral" with a target price of $14.

Standard & Poor's Equity Research analyst Raymond Mathis also downgraded shares of Molson Coors to "sell" from "hold" and dropped the price target to $63 from $65.

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