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Constellation Brands Attains New High

Zacks Equity Research

Shares of Constellation Brands Inc. (STZ) reached a new 52-week high of $85.20 yesterday and closed the trading session at $84.97. Apart from strong third-quarter fiscal 2014 results and an upbeat guidance, the company has been performing well on the back of its brand building and inorganic growth strategies. Notably, the stock price of this beverage company had surged approximately 22.7% year-to-date.

The average volume of shares traded over the last 3 months was approximately 1,534K. Moreover, the company currently trades at a forward P/E of 21.3x, in line with the peer group average of 21.3x. Further, the company’s long-term estimated earnings per share growth rate of 16.5% is substantially higher than the peer group average of 10.6%.

Constellation Brands’ sustained focus on brand building and introduction of new products in the wine and spirits business are the major factors behind the stock’s momentum. Last week, the company entered into a long-term strategic agreement with VATS Liquor for brand building of the world’s number one selling table wine – Robert Mondavi in China.

Additionally, last year, the company acquired Grupo Modelo SAB de C.V.’s U.S. beer business, which included the full ownership of Crown Imports from Anheuser-Busch InBev SA/NV (BUD). Moreover, Constellation Brands is enhancing its distribution channels in retail and effectively implementing strategic merchandising initiatives to augment sales.

Further, we observe that investors were optimistic about this Zacks Rank #3 (Hold) stock after it posted earnings of $1.10 per share on Jan 8, which handily surpassed the Zacks Consensus Estimate of 91 cents and rose 74.6% year over year. We observe that the company had registered positive earnings surprise over the trailing four quarters with an average beat of 6.5%.

Constellation Brands reported net sales of $1,443.3 million, marking a rise of 88.2% from the prior-year quarter and came ahead of the Zacks Consensus Estimate. The year-over-year top-line growth was primarily attributable to complete consolidation of the Crown Import business.

Considering the positive impact from the full consolidation of Grupo Modelo and strong third-quarter results, management raised its guidance for fiscal 2014. Constellation Brands expects fiscal 2014 adjusted earnings to be in the range of $3.10–$3.20 per share, compared with $2.80–$3.10 projected earlier.

The company is scheduled to report its fourth quarter and fiscal 2014 results on Apr 9. Currently, the Zacks Consensus Estimate for the fiscal stands at $3.19, which lies near the higher end of the guidance range.

Apart from Constellation Brands, other stocks like Foot Locker, Inc. (FL) and Skechers USA Inc. (SKX) achieved new 52-week highs of $47.23 and $36.78 respectively, on Mar 31, 2014.

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