Molson Coors TAP: The Downgrade Catalyst and Tariff Trade

The immediate catalyst arrived yesterday. Shares of Molson Coors fell 3.46% in mid-day trading on Jan 16, a move triggered by a fresh sell signal from BNP Paribas. The French bank reiterated an "underperform" rating and slashed its price target to $40.00, implying a potential 21% downside from recent levels. This downgrade is a clear tactical sell signal, but it's merely the latest symptom of a deeper, persistent threat.

That threat is the 50% U.S. tariff on aluminum, a structural overhang that has now become a key driver of the company's deteriorating financial outlook. The tariff, which took effect in June, has forced Molson Coors to slash its annual forecast twice this year. In August, the company cited "higher-than-expected indirect tariff impacts on the pricing of aluminum" as a primary reason to cut its profit outlook. The latest numbers show the squeeze: the company now expects net sales to decline 3% to 4% and earnings before taxes to plummet 12% to 15%, a far steeper drop than earlier projections.

The downgrade is a reaction to this ongoing pressure, but the tariff is the fundamental problem dictating the stock's near-term path. While the $40 target from BNP Paribas is a tactical warning, the real story is the company's struggle to navigate a 50% cost increase on a critical input, all while facing weaker consumer demand. Until that structural overhang is resolved, the stock will remain vulnerable to further downward revisions.

Financial Impact: The Tariff's Direct Hit to the P&L

The tariff's damage is now baked into the company's financial plan. Molson Coors has slashed its annual outlook twice this year, with the latest cut showing a sharp reversal from earlier expectations. The revised forecast calls for annual adjusted earnings per share to fall 7% to 10%, a dramatic shift from its prior guidance of a low single-digit rise. This is a direct hit to the bottom line.

The top-line pressure is equally severe. The company now expects net sales for the year to decline 3% to 4%, a steeper drop than its earlier prediction of a decline in the low single-digits. This widening gap between expectations and reality underscores the accelerating squeeze.

CEO Gavin Hattersley has explicitly cited the tariff as a key driver. In his statement, he pointed to "higher-than-expected indirect tariff impacts on the pricing of aluminum" as a primary reason for the forecast cut. The 50% U.S. tariff on aluminum, which took effect in June, has forced the company to absorb significant cost increases for the metal used in its cans. This is not a minor accounting adjustment; it is a fundamental shift in the cost structure that is forcing a reassessment of the entire year's financial trajectory.

Valuation and the Analyst Divide

The stock's current price of $48.89 sits in a clear valuation trap. It is down 24.4% from its 52-week high, reflecting the weight of the tariff-driven earnings collapse. Yet the average analyst price target of $51.65 implies only a modest 5.6% upside from here. This narrow band of optimism, anchored by a consensus "Hold" rating, masks a deep strategic divide.

The range of targets is telling. From a high of $72.00 to a low of $40.00, the spread captures the fundamental uncertainty. The BNP Paribas target of $40, reiterated recently, suggests a view that the tariff impact is a permanent de-rating of the business. That $40 level implies a potential 21% downside from the current price, a stark warning that the stock's decline may not be over.

This divide is tactical. Bullish analysts may be looking past the near-term tariff pain, betting on a recovery in consumer demand or operational fixes. The bearish camp, led by BNP Paribas, sees the aluminum cost shock as a structural change that permanently lowers the earnings power and, therefore, the fair value. For now, the market is leaning toward the latter view, as evidenced by the stock's steep fall and the downward revisions to the outlook. The valuation gap between the average target and the low end suggests the market is pricing in a high probability of further disappointment.

Catalysts and Risks: What to Watch Next

The immediate test arrives with the upcoming fourth-quarter earnings report in early 2026. This release will be the key data point to confirm or contradict the company's revised annual forecasts. Analysts will scrutinize whether the reported sales decline of 3% to 4% and the projected earnings per share drop of 7% to 10% are holding steady or if further deterioration is underway. Any deviation from these targets, especially if it points to a steeper sales or profit fall, would validate the bearish thesis and likely trigger another round of downgrades and price cuts.

Beyond the quarterly numbers, the single most critical factor to monitor is any shift in U.S. trade policy. The 50% aluminum tariff is the core, avoidable risk that has forced the company to slash its outlook twice. While the policy is currently in place, any movement toward renegotiation or exemption would directly alleviate the fundamental cost pressure. The market will be watching for signals from Washington, as the resolution of this tariff is the primary lever that could unlock the stock's valuation trap.

The key risk, however, is that the tariff remains in place. If it does, the company's strategy of absorbing costs rather than passing them to consumers will continue to compress margins. This dynamic, combined with persistent volume declines in key markets, makes the current price a potential value trap. The stock may trade at a discount to its historical multiples, but if the tariff-driven earnings collapse continues unabated, that discount could widen further. For now, the setup is clear: the stock's fate is tied to a policy decision, not operational execution.