Molson Coors (TAP)

Beer company Molson Coors (NYSE:TAP) fell short of the markets revenue expectations in Q3 CY2025, with sales falling 2.3% year on year to $2.97 billion. Its GAAP loss of $14.79 per share decreased from $0.96 in the same quarter last year.

Company Overview

Sporting an impressive roster of iconic beer brands, Molson Coors (NYSE:TAP) is a global brewing giant with a rich history dating back more than two centuries.

These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the rise of cannabis, craft beer, and vaping or the steady decline of soda and cigarettes. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.

Competitors include Anheuser-Busch Inbev (NYSE:BUD), Boston Beer (NYSE:SAM), and Constellation Brands (NYSE:STZ) along with international companies such as Asahi, Carlsberg, and Heineken.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $11.21 billion in revenue over the past 12 months, Molson Coors is one of the larger consumer staples companies and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because it’s harder to find incremental growth when your existing brands have penetrated most of the market. For Molson Coors to boost its sales, it likely needs to adjust its prices, launch new offerings, or lean into foreign markets.

As you can see below, Molson Coors grew its sales at a sluggish 1.6% compounded annual growth rate over the last three years as consumers bought less of its products. We’ll explore what this means in the "Volume Growth" section.

This quarter, Molson Coors missed Wall Street’s estimates and reported a rather uninspiring 2.3% year-on-year revenue decline, generating $2.97 billion of revenue.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection is underwhelming and indicates its newer products will not lead to better top-line performance yet.

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

Molson Coors’s average quarterly sales volumes have shrunk by 5.6% over the last two years. This decrease isn’t ideal because the quantity demanded for consumer staples products is typically stable.

In Molson Coors’s Q3 2025, sales volumes dropped 6% year on year. This result represents a further deceleration from its historical levels, showing the business is struggling to move its products.

Molson Coors has good unit economics for a consumer staples company, giving it the opportunity to invest in areas such as marketing and talent to stay competitive. As you can see below, it averaged an impressive 38.8% gross margin over the last two years. Said differently, Molson Coors paid its suppliers $61.25 for every $100 in revenue.

Molson Coors’s gross profit margin came in at 39.5% this quarter, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Unprofitable public companies are rare in the defensive consumer staples industry. Unfortunately, Molson Coors was one of them over the last two years as its high expenses contributed to an average operating margin of negative 3.1%.

Analyzing the trend in its profitability, Molson Coors’s operating margin decreased by 33.7 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Molson Coors’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q3, Molson Coors generated a negative 115% operating margin. The company's consistent lack of profits raise a flag.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

In Q3, Molson Coors reported EPS of negative $14.79, down from $0.96 in the same quarter last year. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Molson Coors has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 9.9% over the last two years, quite impressive for a consumer staples business. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Molson Coors’s free cash flow clocked in at $483 million in Q3, equivalent to a 16.2% margin. This result was good as its margin was 4.6 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Molson Coors’s five-year average ROIC was negative 1.1%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer staples sector.

Molson Coors reported $950.2 million of cash and $6.29 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.34 billion of EBITDA over the last 12 months, we view Molson Coors’s 2.3× net-debt-to-EBITDA ratio as safe. We also see its $225.7 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Molson Coors beat analysts’ gross margin expectations this quarter. We were also happy its EBITDA outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed. Overall, this was a weaker quarter. The stock remained flat at $43.09 immediately after reporting.

Updated: December 4, 2025 at 9:38 PM EST

Are you wondering whether to buy Molson Coors or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Molson Coors doesn’t pass our quality test. To kick things off, its revenue growth was weak over the last three years, and analysts expect its demand to deteriorate over the next 12 months. And while its EPS growth over the last three years has significantly beat its peer group average, the downside is its declining operating margin shows the business has become less efficient. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Molson Coors’s P/E ratio based on the next 12 months is 8.4x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $50.81 on the company (compared to the current share price of $45.66).