Why Molson Coors Stock is beating the market so far in 2022

What happened

Molson Coors Beverages (NYSE: TAP) shareholders are beating the market by a wide margin this year. The stock of alcoholic beverages jumped 18% in the first half of 2022, according to data provided by S&P Global Market Intelligence, compared with a 21% drop in the S&P500.

This performance is even better when you compare the beer giant to its industry peers. boston beer, Constellation Brandsand Anheuser-Busch InBev are all trading lower so far in 2022.

Molson’s relatively strong performance was boosted by its market share gains and better growth and earnings prospects.

So what

Molson Coors said in its latest earnings update in early May that sales volumes rose 10% in the first quarter, which ended in late March. This expansion result easily beat peers including Constellation Brands, Boston Beer and Anheuser-Busch. It was propelled by strong demand for core beer brands including Coors Light and Miller Light, but also by positive reception to Molson Coors’ new introductions into the hard seltzer water niche.

The wins sparked an 18% surge in first-quarter sales, marking the company’s fastest year-over-year increase in more than a decade. “The start of 2022 has given Molson Coors continued momentum,” Chief Financial Officer Tracey Joubert said in a press release.

The company has also demonstrated strong pricing power, with prices and sales volumes increasing so far in 2022. First-quarter operating profit was $224 million, up from $177 million. the previous year.

Now what

In early May, executives expected net sales to rise about 5% for the full year, while core earnings would grow at a slightly faster pace. Both of these targets have remained unchanged since their first official forecast for 2022 earlier this year.

Economic growth slowed in the weeks following Molson Coors’ first quarter announcement. And consumer spending is under pressure from faster inflation. That’s why investors will be watching the company’s upcoming earnings report, due out in late July, closely for signs of trouble balancing sales growth and profitability.

The stock should continue to generate strong returns if Molson Coors maintains its positive market share momentum without sacrificing much in terms of operating profit margin. On the other hand, the rally could come to a halt if its late-July update shows weakening appetite for its premium beer products as consumers shift spending priorities.

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Demitri Kalogeropoulos has no position in the stocks mentioned. The Motley Fool fills positions and recommends Constellation Brands. The Motley Fool recommends Anheuser-Busch InBev NV and Boston Beer. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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