Stock (Symbol)

Constellation Brands (STZ)

Stock Price

$173

Sector

Food & Necessities

Data is as of

April 20, 2017

Expected to Report

Jun 28

Company Description

Constellation Brands, Inc. is an international beverage alcohol company. The Company is a producer and marketer of beer and wine the United States and Canada. Its segments include Beer, Wine and Spirits, and Corporate Operations and Other. It is a multi-category supplier (beer, wine and spirits) of beverage alcohol in the United States. It sells a number of brands in the import and craft beer categories, including Corona Extra, Corona Light, Modelo Especial, Ballast Point and others. It is a producer and marketer of wine, and sells a number of wine brands across various categories, including table wine, sparkling wine and dessert wine, and across all price points, such as popular, premium and luxury categories. Some of its wine and spirits brands sold in the United States include Black Velvet Canadian Whisky, SVEDKA Vodka, Meiomi, Robert Mondavi, Wild Horse, among others. Source: Thomson Financial

Sharek’s Take

Constellation Brands (STZ), the world’s leader in premium wine and the third largest beer company in the US, continues to beat the street and raise profit estimates. Last qtr STZ was expected to have 15% profit growth and delivered 24%. Then he company raised estimates going forward. 2017 estimates have jumped from $7.13 to $7.22, $7.52 and now $7.98 in just the last 4 qtrs. What will STZ make this year? Perhaps $9? Constellation was founded in 1945 as Canandaigua Industries, and originally sold bulk wine by the barrels. Over the years the company introduced of new brands such as Richard’s Wild Irish Rose wine in 1954, J. Roget Champagne in 1979, Sun Country Wine Coolers in 1984, and Arbor Mist “wine with fruit” in 1998. Acquisitions have played the leading role in company growth. In 1993 it acquired Barton which came with the Peroni & St. Pauli Girl beer brands. The company changed its name to Constellation Brands in 2000 then in 2004 acquired Robert Mondavi for $1 billion followed by SVENDA vodka in 2007. STZ’s biggest acquisition was in 2013 when it paid $4.75 billion for Corona, Pacifico, Modelo & Tsingtao from Anheuser-Busch InBev. Constellation is a hot stock, and with profits expected to an average of 20% the next 4 qtrs the momentum will likely continue if STZ keeps beating the street. I think the company could deliver 30% profit growth in three of the next four qtrs.Plus, with a P/E in the low-20s the stock’s not expensive. I will purchase STZ today in the Growth Portfolio.

One Year Chart

Note: these charts and tables were done on 4/20 when STZ was $173. Today, 6/2, its $186. Yes I am buying high but I was trying to buy low at $135 last qtr and that kept me out of the stock entirely. Last qtr STZ delivered profit growth of 24% which beat the 15% estimate as sales grew 6%. Profit Estimates increased and are now 29%, 27%, 2% (tough comparisons vs a year ago) and 20% for the next 4 qtrs. The P/E of 22 is fair. The Est. LTG just got reduced from 18% to 16% per year.

Fair Value

I used to own this stock many years ago, and sold when profit growth slowed. Then I took STZ off my radar. I shouldn’t have, as profit growth took off in 2013. The P/E was in the teens then, its in the low-2os now. Still, the momentum is strong here and although I don’t expect the stock to tear higher as it had been, I still feel the stock will be higher in the coming years.

Bottom Line

Constellation Brands has had quite a run the past five years, thus I have been hesitant to buy high. But now profits are growing around 25% a qtr and with a P/E below 25 I think the stock will continue to work its way higher and I don’t want to be left behind any longer. I will add STZ to the Growth Portfolio where it will rank 17th in the Power Rankings.