Constellation Brands Up To Strong Buy on Earnings Excellence


On Jul 3, 2014, Zacks Investment Research upgraded Constellation Brands Inc. (STZ) to a Zacks Rank #1 (Strong Buy) following its splendid quarterly performance as well as raised guidance. Shares of this beverage company rose to a new 52-week high of $94.77 yesterday, before closing on $90.45.

Why the Upgrade?

Constellation Brands reported outstanding first-quarter fiscal 2015 results on Jul 2, wherein earnings jumped nearly threefold to $1.07 per share from 38 cents posted in the comparable year-ago quarter mainly driven by the acquisition of Crown Imports business last year. Moreover, quarterly earnings surpassed the Zacks Consensus Estimate of 92 cents per share.

Net sales more than doubled from $673.4 million in the first quarter of fiscal 2014 to $1,526.0 million in the reported quarter. Moreover, the company’s top-line was also above the Zacks Consensus Estimate of $1,478.0 million. The year-over-year increase in top line was primarily attributable to complete consolidation of the Crown Import business as well as strong demand for beer.

The company's beer segment revenues increased 14% to $867.7 million from $761.6 million in the comparable year-ago quarter. However, the company's wine and spirits sales declined 2% year over year to $658.3 million due to unfavorable foreign currency exchange rates and lower shipment volume resulting from destocking of inventory by distributors. On a constant currency basis, the segment’s net sales inched down 1%.

Following its strong start of the fiscal, the company raised its forecasts for fiscal 2015. Constellation Brands now expects fiscal 2015 adjusted earnings to be in the range of $4.10—$4.25 per share, up from previous guidance range of $3.95—$4.15 per share and compared with $3.25 earned in fiscal 2014. On a reported basis, earnings per share in fiscal 2015 are now anticipated to be in the range of $3.90—$4.05 as against $3.75—$3.95 projected earlier and $9.83 reported in fiscal 2014.

As the largest wine company in the world, Constellation Brands has a formidable portfolio of well-known brands. The company’s consistent focus on brand building and its initiatives to include new products in its wine and spirits business are the key revenue drivers for the stock.

Owing to its strategic endeavors, it is witnessing robust depletion trends and increasing market share in the U.S. wine and spirits category. Moreover, the company is increasing its distribution points in retail and effectively executing its strategic merchandising initiatives, aimed at bolstering sales.

Other Stocks to Consider

Other well performing stocks in the Beverages-Alcohol space include Castle Brands Inc. (ROX) sporting a Zacks Rank #1 (Strong Buy) along with Brown-Forman Corporation (BF.B) and Molson Coors Brewing Company (TAP), both carrying a Zacks Rank #2 (Buy).

Read the Full Research Report on BF.B
Read the Full Research Report on STZ
Read the Full Research Report on TAP
Read the Full Research Report on ROX

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