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Constellation Brands Upped to Outperform

Zacks Equity Research

On Oct 10, 2013, we upgraded Constellation Brands Inc. (STZ) to Outperform based on its better-than-expected second quarter bottom-line results and upbeat guidance for fiscal 2014. The company – which is a global producer and marketer of beer, wine and spirits – became a Zacks Rank #1 (Strong Buy) stock shortly after announcing second-quarter results.

Why the Upgrade?

Constellation Brands’ second-quarter fiscal 2014 adjusted earnings per share came in at 96 cents, handily beating the Zacks Consensus Estimate of 89 cents and up 35.2% on a year-over-year basis. The major driving factor was consolidation of the Crown Imports business.

Further, management raised its guidance for fiscal 2014 based on impressive quarterly results and leverage from the Grupo Modelo acquisition. 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.

Following the second-quarter results, the Zacks Consensus Estimate for fiscal 2014 and 2015 moved up 5.3% and 4.7% to $2.98 and $3.75 per share, respectively, over the last 30 days.

Overall, we are optimistic about Constellation Brands’ prospects. This is because apart from strong second-quarter results, the company has carved a niche for itself with a formidable portfolio of well-known brands.

Moreover, Constellation Brands’ focus on brand building and its growth initiatives have helped it to achieve steady depletion trends and increase market share in the U.S. wine and spirits category. Further, the company has been pursuing strategic acquisitions in order to strengthen its foothold in the U.S. wine industry and to increase its portfolio of brands. The buyout of Grupo Modelo has proved to be accretive to the company’s earnings.

We believe that such initiatives, along with inorganic expansion efforts, will likely aid Constellation Brands’ long-term growth.

Other Stocks to Consider

Other stocks in the beverage and alcohol sector worth considering include Molson Coors Brewing Company (TAP), Boston Beer Co. Inc. (SAM) and Diageo plc (DEO). All of these carry a Zacks Rank #2 (Buy).


Read the Full Research Report on STZ
Read the Full Research Report on TAP
Read the Full Research Report on DEO
Read the Full Research Report on SAM

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