BUSINESS

Molson Coors shares hit 52-week high on U.S. jobs recovery, analyst upgrade

04/02/2013 05:07 EDT | Updated 06/02/2013 05:12 EDT
MONTREAL - Molson Coors shares hit a 52-week high for a second consecutive day on Tuesday on the prospects of a U.S. employment recovery, new products and an analyst's upgrade.

The Montreal and Denver-based brewer's shares (NYSE:TAP) set a new threshold of $52.93 in early trading on the New York Stock Exchange before closing at US$52.28, up 38 cents in heavy Tuesday trading. While shares in Molson Coors (TSX:TPX.B) also set a record on the Toronto Stock Exchange, hitting $53.55 per share before closing up 73 cents at C$52.88 by day's end.

Goldman Sachs analyst Judy Hong upgraded the company's stock to buy and raised her 12-month target price 34 per cent to US$63.

"We believe Molson Coors is a compelling risk/reward proposition as the U.S. employment recovery and a new product cycle drive upward earnings revisions and multiple re-rating for this deep value asset," she wrote in a report.

Hong concedes that her outlook differs from most analysts for one of the "most under-loved" of consumer staples stocks. Her forecasts are above consensus in each of the next three years.

Molson Coors shares are well below its 10-year average and its brewery peers.

The key catalyst for Hong's outlook is an expectation that North American beer volumes will rise with an improving job environment.

The beer industry has been hit in recent years as jobless consumers have had cut back on purchases or switched to alternatives.

Consumption is about eight per cent below normalized levels after falling 0.6 per cent annually between 2008 and 2012. But acceleration in the mainstream beer market could lift industry volumes by 2.3 per cent a year through 2015, Hong said.

A demographic shift whereby baby boomers turned to wine and spirits is largely over and should allow beer's loss of market share to turn moderate or disappear altogether.

Hong also said a pipeline of promising new highest priced products including Third Shift and Redd Al could also add about four per cent to MillerCoors volumes. The second-largest beer company in the U.S. with nearly 30 per cent of beer sales is a joint venture of SABMiller and Molson Coors.

Profits are also expected to accelerate on a new cost savings program that will likely be announced in June, and savings from European consolidations following the Starbev acquisition that Molson Coors has already said should yield $50 million.

Molson Coors reported in a regulatory filing Tuesday afternoon that CEO Peter Swinburn's total compensation decreased to about US$7 million in 2012, from US$7.59 million a year earlier. His base salary increased to US$1.07 million last year and he received $3.2 million in stocks, $800,000 in stock options and $709,500 in non-equity incentives.

Vice-chairman Peter Coors' compensation increased to US$2.66 million from US$2 million in 2011, largely as a result of higher pension value. His base salary was unchanged at US$850,000.