Coors Brews a Double

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By Rick Aristotle Munarriz (TMF Edible)
December 11, 2000

Adolph Coors Co.

Ticker: (NYSE: RKY)
Phone: �303-279-6565

Price (12/8/00): $75

How Did It Double?

Any beer lover will tell you, the only bad brew is a flat one. The same would apply to the brewmeisters. Adolph Coors (NYSE: RKY) has been a consistent grower. No flatness here. Last year, net sales grew 8%. Through the first nine months of this year, sales are also up by 8%.

Even more impressive has been the gradual margin improvement. Last year profits more than doubled the top-line growth pace -- climbing 21%. So far this year, earnings are also up another 22% (excluding favorable charges). How's that for brew quality consistency?

The record results are also coming from a consumer market willing to pay up a bit more. That is why the 8% sales spurt has come on only a 5% increase in volume this year.

While these may not be the Rocky Mountain High revenue and profit growth figures one expects from a Wall Street high-flier, it is a sign of the times. Volatility hungers for stability and Coors has that on tap right now. Like baseball players in the homer-friendly light air of Coors Field -- where the Colorado Rockies swing -- Coors is hitting it out of the ballpark.

Business Description

Founded in 1873, Adolph Coors Co. is the third-largest brewer in the U.S. While Coors Light makes up a majority of the brewer's revenues, the Colorado company's other major brands include Original Coors, Killian's Irish Red, ZIMA, and Keystone Light.

The company sold 23 million barrels of beer worldwide last year.

Financial Facts

Income Statement
12-month sales:� � �� $2179.1 million
12-month income:� � � $111.5 million
12-month EPS:� � � � �$2.99
Profit Margin:� � � � � � �5.1%
Market Cap:� � � � � $2820 million

Balance Sheet
Cash:� � � � � � � � ��� $155.4 million
Current Assets:� �� �$506.5 million
Current Liabilities:� �$383.6 million
Long-term Debt� � ���$105.0 million

Price-to-earnings:�� 25.1
Price-to-sales:� � �� 1.3

How Could You Have Found This Double?

Beer money is not chump change. Last week, we took a look at Miller Brewing parent Philip Morris (NYSE: MO) and its recent foamy market run. Granted, these are two entirely different stories. Philip Morris is bouncing back after years of being weighted down by tobacco liability. Coors is simply coming into its own at a time when food and beverage stocks are winning investor fancy.

During erratic market times, investors often cling to the security of consumer nondurables that are typically immune to economic shifts. Nonalcoholic beverage titans like Coke (NYSE: KO) and Pepsi (NYSE: PEP) have performed well since the tech downturn began in the spring. Despite uncertainties at Coke and slightly lower sales at Pepsi, shareholders seem to be flocking to predictable shelter over random growth hazards in glitzier sectors.

Strolling past the supermarket aisle you'll find the brands behind parent companies that are holding up quite well. Sara Lee (NYSE: SLE) and Conagra (NYSE: CAG) are nearing 52-week highs. The grocery trek might wind up at the refrigerated beer section (yes, Coors products are kept cold throughout the manufacturing and distribution process too). There you would find Coors, probably a bit more attractive than the other food conglomerates stumbling to put up Coors-like financial consistency.

Where to From Here?

Coors Light? Maybe not so light for long. The company will be growing capacity next year, with capital expenditures running between 40% and 66% more than this year's outlay. How efficiently the company will run as it ramps up production and begins to account for the higher spending is unclear in the near term. With everything from packaging costs to transportation costs inching up, it wouldn't be surprising to see margin growth take a breather here.

Earnings growth is pegged at just 12% next year and even that won't be an easy feat. Still, in the long run, Coors' moves to meet growing demand should pay off.

The larger threat, oddly enough, might be a tech stock recovery. Those who have checked out of the Nasdaq Inn in favor of supermarket sanctuary can just as quickly remove the Sara Lee, Pepsi, and Coors impulse purchases from their portfolio carts.

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