Morgan Stanley upgraded Adolph Coors (RKY) to equal-weight from underweight.
Analyst Bill Pecoriello says the company is raising retail prices, following Anheuser-Busch's lead, in the key California, Florida and Texas regions. Pecoriello says a proprietary survey shows improvement in the Coors Light brand, which generates over 50% of the company's profits. He thinks the price increase, stronger brand, and cost savings in the U.S. and Great Britian should buffer an earnings risk in 2003, when the company is likely to spend more on marketing given the stronger brand.
Pecoriello notes the stock is trading at an inexpensive 11.7 times his 2003 earnings per share estimate -- a 47% discount to Anheuser-Busch. He sees $4.64 2002 earnings per share, but cut his $5.00 2003 earnings per share estimate to $4.85 due to reinvestment costs in the U.S.