Beer sales bubble in US
Is America's increasing thirst a sign of an improving economy?
In areas of the U.S. where the unemployment rate is low, beer sales have remained strong as the local and national economies have not prevented affluent consumers from enjoying a cold lager or flavorful microbrew.
Due to recent outperformance, Morgan Stanley downgraded Molson Coors (TAP) to "underweight" on Monday after the company reported an 18% rise in share value since its June 4 low, beating expectations that were for 7%. Molson Coors currently accounts for about one-quarter of the U.S. beer market.
Credit Suisse also recently raised estimates on Anheuser-Busch InBev (BUD), noting the U.S. has more leverage margin-wise on price vs. volume in relation to other markets.
The campaign for beer sales never rests and companies are continually rolling out new products. Molson Coors recently released (in select markets) its Coco Breve malt beverage, which contains coconut water and Redd's (an apple flavored ale).
Anheuser-Busch shares are down slightly in midday trading Wednesday, but closed up 2.04% on Tuesday and are up 44.99% year to date. Molson Coors' shares are flat pre-market and year to date are down only 0.6%. Boston Beer Co. (SAM) shares are up slightly Wednesday and are down 0.65% year to date.
With the exception of Anheuser-Busch, share values do not reflect the recent spike in beer sales as production and shipment costs have impacted shares as well as recent tax increases from the Brazilian government. Analysts believe that beer companies will need to raise the prices of products (3% to 4%) in order to accommodate the tax hikes.
Citigroup believes that when compared to the food and/or tobacco companies, beer industry profits tend to be more volatile, with just below half of those profits coming from the U.S. Brazil's infrastructure revamp has increased shipments and profitability in South America, but has time before profits start to ramp up exponentially as expected.
In Molson Coors' most recent earnings release, the company reported earnings per share (EPS) of $1.38 versus analysts $1.14 estimate, largely thanks to the Starbev contribution (despite losing market share in the U.S. and Canada). Though valuation remained enticing, analysts at Goldman Sachs remain "neutral" on shares ahead of further increases in sales.
In other beer news, Heineken (HINKY) announced its cancellation of a 2.5 billion euro bridge loan to fund its acquisition of Asia Pacific Breweries, as the company won full control of the Tiger beer maker last week. Shares are flat in trading Wednesday after closing up 3.22% on Tuesday. Year to date, Heineken shares are up 33.56%.
More from Benzinga
Beer sales are up this time every year!!!! The NFL season has started!!!!
Hey MSN why dont you print some real news!!!
Try writing about the Libor Scandal and all the bankers they are cracking down on in Europe!!!
You know, those same bankers that control the US banks as well!!
we are drinking more cause we are tired of waiting for the hope we were promised we see the change and its not good another reason to drink
Maybe beer sales are increasing because people don't want to spend money on more expensive mixed drinks and wine. Also, beer is the most consistent alcoholic beverage to drink. Wine and mixed drinks don't have the consistency and uniformity of beer. Finally, with beer you get a lot more beverage for the buck.
Yuno: I don`t know what country you live in, but my family and friends have never had it
so good.The market is up 65% with Obama, inflation is low, there`s been 30 straight
months of job growth, one war is over and the other is winding down.I guess some
people would complain if they won the lottery.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The solid report comes a month after the retailer closed all of its Canadian operations.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.