The key to a successful investment is finding a company that can grow over time. Different companies grow in different ways, but regardless of what helps a business boost its revenue, larger size brings advantages like economies of scale and the opportunity to dominate an industry more effectively. In particular, Charter Communications (CHTR -2.12%), Newell Brands (NWL -1.42%), and Molson Coors Brewing Company (TAP -1.38%) are the three companies in the S&P 500 with the highest revenue growth rates over the past year. Let's look at what has launched their top-line figures higher and whether the growth is sustainable into the future.
|
Stock |
1-Year Revenue Growth Rate |
1-Year Total Return |
|---|---|---|
|
Charter Communications |
269% |
54% |
|
Newell Brands |
155% |
13% |
|
Molson Coors |
89% |
(13%) |
Data source: Yahoo! Finance.
Charter climbs on Time Warner purchase
The biggest thing that has lifted cable giant Charter Communications' revenue was the consummation of its merger with Time Warner Cable in May 2016. The deal cost Charter $79 billion in stock and cash, but it also made Charter a powerhouse in the industry, with about 19 million broadband users and 15 million cable subscribers. Although the Federal Communications Commission added some conditions to the deal, its approval allowed Charter to assume the No. 2 role in the cable industry and make a legitimate challenge to leading rival Comcast.
Clearly, acquisitions like that don't come around all the time, and so investors won't see anything close to that sales growth rate going forward. 2017 revenue will likely be about 40% higher than Charter's 2016 revenue, reflecting the fact that the merger occurred midyear in 2016. After that, Charter will likely see more sedate revenue growth in the 6% range, but even faster profit growth is possible if the cable company can use its leverage to squeeze its customers even harder.
Image source: Charter Communications.
Newell gains ground due to Jarden acquisition
Similarly, Newell Brands used a key acquisition to help its revenue more than double. In late 2015, the company then known as Newell Rubbermaid said it would merge with fellow consumer goods manufacturer Jarden. Together, the deal brought together well-known brands like Jarden's Mr. Coffee coffeemakers and Rawlings baseball gloves with Newell's Sharpie markers and Rubbermaid kitchen storage items. The value of the deal was more than $15 billion, and it closed in April 2016.
Going forward, Newell appears to have solid momentum. Net income in its most recent quarter climbed by more than half, and although earnings per share haven't yet caught up because of the higher number of outstanding shares, Newell sees plenty of opportunities for further growth. Future increases in sales annually are likely to fall back to the 2% to 4% range, but Newell's hope is that it can focus on more profitable opportunities to make shareholders happy.
Molson picks up some extra business
Molson didn't initiate a major merger move of its own in the past year, but it did benefit from the M&A activity of its peers. When Anheuser-Busch InBev (BUD -0.53%) bought SABMiller, it had to divest certain assets in order to get regulatory approval of the deal. Molson was a willing partner in that game, taking full control of what had been the MillerCoors joint venture and ensuring that going forward, it can sell both Molson and Miller brands both in the U.S. and Canada.
Growth in the beer market has been tepid lately, and so despite a near-doubling in revenue from the MillerCoors move, Molson will likely have to live with revenue increases in the 1% range annually over the next several years. However, the company will do its best to navigate changing tastes among beer consumers, and having greater control over the North American beer market should be a long-term source of better performance for Molson Coors.
Growing sales is a great sign of ambition among a company's management team, and successful companies manage to turn higher revenue into more profit. That in turn should lead to better share price returns, and it'll be up to the leaders of Molson, Newell, and Charter to make sure they live up to the promises they made with their revenue-enhancing strategies.
