🗞️ 6 Industry Leaders that Just Hit 52-Week Lows

Happy Sunday!

This week we’re talking Pepsi’s demand concerns🥤, a US beer conglomerate trading at a record-low valuation🍺, and 6 industry leading companies that just hit new 52-week lows 📉.

Let’s dig in.

News Roundup

• Paramount Acquired: After months of negotiations and back-and-forth headlines, it appears as though entertainment giant Paramount Global is finally being acquired. On Monday, Paramount announced that it is set to merge with Skydance Media, a private entertainment company run by David Ellison.

  The complicated acquisition will involve a consortium of investors and result in a ~28% premium for existing shareholders. The acquisition comes after Paramount has seen a major deterioration in its profitability.

• Pepsi Earnings: The global beverage and snack giant Pepsi reported better than expected profits for the 2nd quarter, but missed Wall Street’s estimates for sales.

  Pepsi, which is home to brands like Gatorade, Quaker Oats, Fritos, and many more, has now reported 7 quarters in a row of volume declines. However, growth in pricing has more than offset the declines to help drive continued growth in overall sales. Pepsi’s stock closed up 3% this week as investors continue to juggle the improved profitability with the weaning demand in the US market.

• Alphabet’s HubSpot Acquisition Falls Through: On Wednesday, news broke that search giant Alphabet was shelving its rumored acquisition of software company HubSpot. HubSpot, which provides a leading CRM primarily for small and medium-sized businesses, was reportedly an acquisition candidate for Alphabet and would have marked the largest acquisition Alphabet has ever made. Hubspot’s stock closed down 19% this week.

Parter Spotlight

Molson Coors: A US Beer Conglomerate For Less Than 10x Earnings

In the 21st century, Americans have been drinking less beer. Alcoholic spirits have gained market share, while spiked seltzer beverages now generate billions of dollars in sales a year. Many young people are ditching drinking altogether.

Molson Coors has felt the brunt of this change. The owner of Miller, Coors, and Blue Moon has seen its stock stagnate for the last 10 years. Its total return is negative 14% while the S&P 500 index – of which it is a part – is up 238%.

This is why the stock now trades at its cheapest trailing earnings ratio of the last 10 years. It currently sports an EV/EBIT of just 9.7.

Investors have mostly given up on Molson Coors. But is the tide beginning to change for the stock?

A Bud Light controversy allowed Coors Light and Miller Light to gain market share in the United States. This caused Molson Coors unit volumes in the United States (its most important market) to grow compared to 2022 after steadily declining for years.

Management has cleaned up its balance sheet as well. The company now sports just $5.2 billion in debt, down from $11.4 billion at the end of 2016. This is a much more reasonable level for a company that generates just over $1.5 billion in operating earnings every year. 

With a cleaned-up balance sheet, management has decided to start repurcashing stock. $2 billion to be exact, planned to be executed over the next five years. On top of this, they have hinted at plans to increase the dividend, which currently yields 3.5%. 

Molson Coors is facing some industry headwinds. However, it trades at a cheap multiple and is returning a ton of cash to shareholders, and recently started to grow sales volumes again.

Does that make the stock a buy?

6 Industry Leaders that Just Hit 52-Week Lows:

1.) Deere & Co

Leading manufacturer of precision agriculture equipment in the US. Distributes through a massive dealership network.

• 10-year Return: 372%

• Market Cap: $98 billion

• EV/EBIT: 11.1x

2.) McDonald's

Global leader in fast food. Operates and franchises more than 42,000 locations around the world.

• 10-year Return: 215%

• Market Cap: $178 billion

• EV/EBIT: 19.1x

3.) Paycom $PAYC

A leader in cloud-based human capital management software for small and medium sized businesses in the US.

• 10-year Return: 953%

• Market Cap: $7.9 billion

• EV/EBIT: 13.1x

Meme of the week

It’s about that time again. Earnings season is just around the corner, which means it’s our chance to remind investors to focus on the metrics that really matter.