BofA cuts Molson Coors rating as U.S. beer slide deepens

Investing.com -- Bank of America downgraded Molson Coors (NYSE: TAP) Beverage to Neutral from Buy and slashed its price objective to $50, driven by steeper-than-expected drop in U.S. beer volumes.

The brokerage said it had assumed industry declines would ease to historic norms and Molson Coors’ market share would level off, supporting margins and a higher valuation.

BofA now forecasts U.S. beer volumes will shrink 4% next year, versus a 1% fall previously.

It likened the competitive landscape to former Coca-Cola (NYSE: KO) chief Doug Ivester’s sheep, parasites and wolves analogy: spirits are wolves taking share, energy drinks are parasites piggy-backing on beer distributors, and brewers are sheep, ceding customers and attention.

The weaker backdrop pushes the stock’s multiple down to 8.3 times 2026 earnings, from 9.9 times, bringing it closer to packaged-food peers with similar growth prospects, the note said.

Every one-million-hectolitre drop in shipments slices roughly 100 basis points from margins, BofA estimated.

Although Molson Coors has invested in a more flexible North American brewery network, it still requires reliable, consistent volume throughput, the analysts added.

The firm cut its earnings forecasts for 2025 and 2026 to $5.70 and $6.02 a share, respectively, from $6.02 and $6.55, citing a weaker second quarter and lower revenue assumptions.

Beer players are sheep, BofA wrote, warning that continued industry contraction will make it hard for Molson Coors to achieve the stability the bank once expected.

Key upside risks, according to BofA, include potential merger interest, an unexpected industry recovery or a fresh spike in inflation that could support pricing.

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