© Reuters. UBS downgrades Molson Coor, Keurig Dr Pepper and Boston Beer to ‘imminent normalisation’
UBS analyst Peter Grom downgraded in a note to clients on Tuesday Molson Coors (NYSE: ), Keurig Dr Pepper (NASDAQ: ) and Boston Beer Company (NYSE: ) were downgraded to Neutral from Buy, saying that while they believe U.S. beverages will be in the long-term Achieving sustainable organic revenue performance within the year, but they believe the horizon will gradually dissipate as the reopening catalyst dissipates.
“Our detailed bottom-up framework suggests that going forward, growth across the group will become more differentiated, with Bevs outperforming HPC by around 15% year-to-date and at a deal premium of around 20% (vs. 5-year average + 13% compared to )), we think investors should become selective within the group,” Grom said. “Our analysis suggests we will continue to see higher levels of organic revenue growth compared to peers, thus offering compelling risk/reward. We take a wait-and-see approach to TAP, SAM and KDP as we anticipate future Growth will slow.”
Beyond 2022, beverage growth will be more differentiated, the analyst added.
“The extent to which internal venues return to pre-pandemic levels will vary by company, but our channel/category analysis indicates that most of the catch-up will be completed by the end of CY22, and we expect investors to focus on companies that can deliver excess organic revenue growth LT, ‘ Grom added.
“The return of on-premise led to outsized growth in TAP, and while we believe in the company’s long-term strategy, we believe slower growth in ’23E will make it difficult for the stock to revalue. For SAM, we think weaker-than-expected hard seltzer growth may would lead to the downside expected by Wall Street. Ultimately, we believe KDP’s risk/reward is balanced at current levels and will await a more attractive entry point.”