USA & Canada: Molson Coors shares fall on downgrade

Shares of Molson Coors Brewing Company declined on October 5th after a Bear Stearns analyst downgraded the stock, noting declining volumes and saying that weakness in Canadian volumes has not yet been fully priced into the stock, The Associated Press communicated on October 5th.

Bear, Stearns & Co. analyst Carlos Laboy said in a research note that the Golden, Colo.-based company had a "difficult summer marked by heavy promotion and volume declines". "We worry that these problems may continue past the third quarter," he wrote. "As a result, we are cutting our third quarter, 2006 and 2007 earnings estimates."

He downgraded the company to "Underperform" from "Peer Perform" and lowered his third-quarter earnings-per-share estimate to $1.42 from $1.57. Analysts are expecting a third-quarter profit of $1.45, according to a poll by Thomson Financial.

The analyst also lowered his 2006 earnings-per-share estimate to $3.71 from $3.92 and his 2007 estimate to $4.55 from $4.66. Analysts see a 2006 profit of $3.85 per share and a 2007 profit of $4.70 per share, respectively.

Laboy noted that Canadian industry volumes were soft in July and is "likely to be worse" in August, when Molson has difficult comparisons against the year-ago month.

In addition, Molson has also been hurt by a highly competitive pricing environment in the beer sector, Laboy said.

"Looking ahead to third-quarter earnings, we believe that the Street is pricing in moderate success in the U.S and has accounted for post-World Cup weakness in the U.K.," Laboy wrote. "We concur with these two assessments but we believe the Street has yet to entirely price in Canadian weakness and the risk to growth into the balance of this year and into 2007."

Molson Coors shares fell $3.07, or 4.4 percent, to $66.03 during midday trading on the New York Stock Exchange. They have traded between $60.70 and $74.10 over the past year.

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