Molson Coors (TAP) Continues Higher as UBS Makes It 'Top Pick'

December 11, 2008 11:43 AM EST

Shares of Molson Coors Brewing (NYSE: TAP) are continuing higher today following a 7.5% rise yesterday. The stock felt a boost on the back of a UBS report released yesterday morning in which the firm named Molson Coors its "Top Pick". The firm maintained its Buy rating and $63 price target on Molson Coors.

The firm made Molson Coors its top pick based on:

• just by delivering the $500 million in cost savings Molson Coors has already guided to, it could grow EBIT by 20% over the next 3 years, assuming flat volume and pricing growth. At the same time, UBS believes that the $500 million in savings could be conservative and estimates that the cost savings could total $1 billion over 5 years.
  
• pricing appears to be sticking. The firm notes the October 1st price increase, pointing out that industry prices are up over 5%, while volumes are up over 3% through early November. Given these trends, UBS believes pricing should remain stable over the next several years.
  
• industry growth trends are improving. UBS specifically notes that recent data suggests that beer volume has begun to outpace both spirits and wine.

Also, UBS raised its FY09 EPS estimate on Molson Coors from $3.75 to $3.80, which compares to the Street estimate of $3.63.

With shares of Molson Coors up 1.8% to $45.37 today, UBS's $63 price target represents potential price appreciation of about 39% from current levels.

Molson Coors Brewing Company, through its subsidiaries, produces and sells beer and other beverages.

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