Shares of Constellation Brands Inc. (STZ) eventually closed trade at a new 52-week high of $66.76 on Nov 8. Apart from strong second-quarter fiscal 2014 results and an upbeat guidance, the stock has been performing well on the back of brand building and inorganic growth initiatives. Notably, this beverage company amassed a year-to-date return of 77.7%.
The average volume of shares traded over the last 3 months was approximately 1,576K. Moreover, the company currently trades at a forward P/E of 22.4x, a 5.6% discount to the peer group average of 23.7x. The last traded price is 5.4% below the Zacks Consensus average analyst price target of $70.60. Additionally, the company’s long-term estimated earnings per share (EPS) growth rate is 14.9%, substantially higher than the peer group average of 10.6%. At present, Constellation Brands has a Zacks Rank #1 (Strong Buy).
Constellation Brands’ sustained focus on brand building and its initiatives to introduce new products in the wine and spirits business are the major factors that drove the stock’s price appreciation. Owing to its strategic endeavors, the company is witnessing strong depletion trends and increasing market share in the U.S. wine and spirits category. Moreover, Constellation Brands is enhancing its points of distribution in retail and is effectively executing strategic merchandising initiatives to boost sales.
The company’s strategic initiatives to strengthen its foothold in the U.S. wine industry and efforts to increase its portfolio of brands are stimulating growth. This is well evident from the company’s recent acquisition of Grupo Modelo SAB de C.V.’s U.S. beer business from Anheuser-Busch InBev SA/NV (BUD).
Considering the positive impact from the recent acquisition of Grupo Modelo and strong second-quarter results, management raised its guidance for fiscal 2014. Constellation Brands now expects fiscal 2014 adjusted earnings to come in the range of $2.80–$3.10 per share, compared with $2.60–$2.90 projected earlier. On a reported basis, earnings per share in fiscal 2014 are now anticipated to be in the range of $9.30–$9.60. Going forward, the company aims to enhance the distribution of the brand in order to drive incremental profits.