Beverage Stocks To Report Q1 Earnings This Week: TAP, BUD

We are in the middle of the Q1 earnings season and investors seem to be happy with the results so far. The quarter’s results have been impressive, showing a stark improvement from the previous quarters. At present, sectors including finance, technology, industrials, basic materials and energy look promising and are delivering improved growth. Interestingly, the pace of growth is expected to persist in the second quarter as well.

On summarizing the performance of the 288 S&P 500 members that reported financial results as of Apr 28, we see that total earnings of these companies were up 13.7% on a year-over-year basis (76.4% of the companies beat EPS estimates) while total revenue increased 8.2% (68.1% beat top-line expectations).

Per the Zacks Earnings Preview, overall first-quarter earnings for the S&P 500 companies are anticipated to be up 11.2% from the year-ago quarter on 6.2% rise in revenues.

The performance of the S&P 500 index is not restricted to a single sector. Among the 16 Zacks sectors, the performance of the Consumer Staples sector has been mixed. As of Apr 28, 40.6% of the total number of S&P 500 companies in this sector reported results. Out of these, 76.9% companies posted an earnings beat (growing 1.5% year over year), while 23.1% surpassed revenues estimates (down 3.3% year over year). While total earnings for the sector are expected to grow 4.3%, revenues are anticipated to increase 4.0%.

Beverage stocks form part of the Consumer Staples sector. Leading firms from the industry have posted mixed results in the quarter. The Coca-Cola Company (NYSE:KO) surpassed revenues estimates but failed to meet earnings expectations in the first quarter of 2017. Plano, TX-based Dr. Pepper Snapple Group Inc. (NYSE:DPS) reported first quarter of 2017 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Meanwhile, PepsiCo, Inc. (NYSE:PEP) and Constellation Brands Inc. (NYSE:STZ) reported better-than-expected results in their recently reported quarters.

So, let’s see what awaits the following beverage stocks that are queued up to report this week.

Molson Coors Brewing Company (NYSE:TAP) is slated to release first quarter of 2017 results before the opening bell on May 3. The beverage company’s earnings exceeded the Zacks Consensus Estimate in two and missed in the remaining two of the trailing four quarters, marking an average miss of 5.70%.

The company has an Earnings ESP of +0.75% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Our proven model shows that Molson Coors is likely to beat earnings because it has the right combination of two key ingredients. We note that a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 (Buy) or 3 for this to happen. The combination of Molson Coors’ Zacks Rank #3 and an Earnings ESP of +0.75% makes us very optimistic about a possible earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Continued difficult economy and competitive pressure, along with lower volumes and significant unfavorable foreign currency are the major headwinds affecting the company. Estimates have also declined over the past 30 days. The stock not only underperformed the Zacks categorized Beverages-Alcoholic industry but also the broader sector on a year-to-date basis. Molson Coors’ shares dipped 2.1% in comparison to the Zacks categorized Beverages-Alcohol industry’s growth of 9.6% and sector’s growth of 7.3% year to date.

The company is therefore focusing on improved marketing strategies for beers and targeting the above-premium brands to boost market share. The company’s recent acquisition of a 58% stake in MillerCoors, cost savings efforts and marketing investments are encouraging. (Read: Is Molson Coors Poised for a Beat in Q1 Earnings?).

Anheuser-Busch InBev SA/NV (NYSE:BUD) , alias AB InBev, is slated to release first quarter of 2017 results on May 4. Last quarter, the company delivered a negative earnings surprise of 58.3%. In fact, it has reported negative surprises in each of the trailing four quarters, with an average miss of 33.2%.

Our proven model does not conclusively show that AB InBev will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. AB InBev currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

AB InBev is on track with the integration of the recently acquired brewing giant SABMiller (LON:SAB). The company is currently in the process of divesting SABMiller assets that it promised as part of the merger deal. Despite the divestitures, this combined mega-brewing company still holds the top spot in the beer industry, controlling about one-thirds of the global beer market. However, the company has reported dismal earnings for four straight quarters now. Further, it provided dismal guidance for 2017. (Read: Will AB InBev Manage to Deliver a Surprise in Q1?).

This is reflected in AB InBev’s stock performance that underperformed the broader industry in the last six months. The stock declined 0.9%, compared to the Zacks categorized Beverages–Alcohol industry's gain of 3.1%.

Stay tuned! Check later on our full write-up on earnings releases of these stocks.

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