The Best Upside and Value in Beer, Wine and Spirits Stocks

24/7 Wall St.

The most fun thing about the business of beer, wine and spirits may simply be drinking it. But someone (or some company) makes the stuff, and you know they are not doing it on a nonprofit basis. Many investors have done very well investing in and around the global alcohol business. The most popular choice among these businesses ebbs and flows by the day. That being said, the alcohol business seems to do just fine in good times and in bad times.

24/7 Wall St. wanted to review the major beer, wine and spirits makers to see where new and possible investors in this sector should look now. While much of our emphasis is on valuation against what the analysts think, there is actually a lot more to the puzzle here. Some of these companies might be stocks to avoid, even if their products are great. The consensus earnings estimates and analyst price targets are provided by Thomson Reuters.

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Anheuser-Busch InBev S.A./N.V. (BUD) still has plenty of value left for investors, it appears. While it is trading at $99.50, "Bud's" consensus price target is $113.15. One analyst even expects its shares to rise up to $124 in the coming year. The implied upside is about 14% on the consensus reading, plus you get close to a 2% dividend. The stock trades at close to 20 times 2013 earnings and close to 18 times 2014 earnings. Even with this much upside, the stock is looking close to all-time post-merger highs.

Beam Inc. (BEAM) also is exhibiting some upside potential. At $65.44, its 52-week high is $69.78, and its consensus price target of $70.75 implies upside of about 8%. Where Beam gets pricey is at 25 times 2013 expected earnings and about 22 times expected 2014 earnings. Then there is only a 1.4% dividend yield.

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Boston Beer Co. Inc. (SAM) has been an amazement, rallying more than 100% from its stock's low of the past year. Even after making its founder a billionaire on paper, this one is actually overpriced, if Wall Street gets to be in the investor taste test. With shares trading around $231, the Thomson Reuters consensus price target is down all the way at almost $200. This stock just never seems to go on sale. In fact, all four analysts have the stock's price target listed under the current price. Sam Adams trades at about 43 times expected 2013 earnings, over twice a normal average in the sector.

Brown-Forman Corp. (BF-B) is most comparable to Beam, yet its upside is marginally less. It is at $70.70, and the 52-week high is $74.29. The consensus price target of $74.44 implies upside of only about 5%. Its dividend is a bit watered down as well at a yield of 1.6%. The empire of wine, whiskey and other spirits seems to be a pricey one for the time being.

Constellation Brands Inc. (STZ) just hit yet another new all-time high on Monday, and shares are currently around $59. Shares trade at about 21 times this year's expected earnings and about 17 times next year's expected earnings. Because it has risen so much, its consensus of $61.80 implies just under 5% upside. Its recent merger ambitions have kept capital tied up, so no dividend is paid. Constellation is at least into beer, wine and spirits.

Diageo PLC (DEO) is another leader close to its all-time highs. At $128, its 52-week high is $131.98, and the consensus price target from analysts of $145 still implies upside of more than 13%. Then there is a dividend yield of about 2.8% to consider as well. At 18 times expected earnings, from a fairly small group of analysts, this one is not sounding too pricey on the surface. Johnnie Walker, Crown Royal, Jose Cuervo and Guinness are just some of its brands, with a wee bit of wine too.

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Molson Coors Brewing Co. (TAP) still has some upside to it if the analysts are correct. Shares were recently around $50.00, versus a $54 consensus price target and a 52-week high of $53.75. One analyst even has a $61 price target, but the upside is closer to 8% at the moment, and investors get a 2.6% dividend yield. The stock price of the parent of Coors is still about $8 or so shy of its pre-recession all-time highs. This one sounds cheaper at about 12.5 times expected 2013 earnings, but analysts are not giving it the upside anticipation.

Anheuser-Busch InBev S.A./N.V. (BUD) is currently the upside king of beers and alcohol for investors by our measurement. It is still trying to grow acquisitively, it has about 14% of implied upside, it is not quite at a 52-week high and it pays close to a 2% dividend yield. Now the company has to figure out how to properly fight the continued trends toward craft beers and heated competition from the wine and spirits market. It even has football season working for it.

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