NEW YORK, NY--(Marketwire - Feb 7, 2013) - Distillery stocks performed well despite shifting preferences of its customers. Consumers now show the preference for well crafted and exclusive spirits. As a result, beverage companies are realigning their portfolios. Beam Inc. plans to consolidate its position in the premium segment of the market. It sold its value brands and now focuses on high-end brands. Another major company, Constellation Brands Inc., is looking to acquire the remaining half of Crown Imports to boost its position in the lucrative U.S. market. The deal will bring the hot selling Corona brand of beer under its full control.
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Beam Inc. reported better-than-expected results for its fourth quarter. Its earnings stood at 79 cents per share, up from 56 cents per share it had earned for the corresponding quarter of the last year. Its revenue for the quarter also increased to $709.1 million. The trend is likely to continue and the stock price may gain further ground in the future. The company benefitted from the overall strength in the spirit market especially in the Bourbon segment. Beam Inc. also expects to grow further in 2013.
Beam Inc. is well diversified geographically, though it faces a slightly weak market in Asia. However, its North American sales were up 8 percent for the quarter. It is also expanding by making acquisitions as it bought Pinnacle Vodka. However, at the very same time, it also plans to dispose of some of its brands, in order to restructure its business. Under its definitive agreement with Luxco, Beam Inc. offloaded its various brands like Calvert Extra and Dark Eyes Vodka. This portfolio of brands was responsible for generating $30 million worth of revenue in 2012. The company plans to focus on high-end, high-margin brands after this restructuring.
Beam Inc. is expected to see better growth in the luxury segment. The company generated $65 million by selling its lower priced brands and is expected to channel its resources into its niche category.
Conversely, Constellation Brands Inc. is one of the most established names in the beverage industry. The company reported positive growth for its main brands in the first half of fiscal 2013. It increased both its net income and revenue for the period. However, the company is going through a rough patch regarding its acquisition deal with Grupo Modelo. As part of a complex acquisition strategy, Constellation Brands is looking to acquire Crown Imports. The acquisition will let the company control the U.S. sales of popular beer brands including Corona. While the acquisition will help this distiller to consolidate its position, the deal is likely to take a long time to be finalized thanks to regulatory obstacles.
Constellation Brands stock grew over 40 percent in the past 12 months. It is expected to make major moves as and when the Grupo Modelo deal is finalized. Though, the company expects its FY 2013 earnings to be lower and to fall in the range of $2.00 and $2.10, such a decline has already been factored in the current stock price. The stock presently trades at Price/Earnings ratio of 16.42, in-line with the industry average.
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Michael Thomas Smith