Stock (Symbol)
Constellation Brands (STZ)
Stock Price
$216
Sector
Food & Necessities
Data is as of
November 4, 2017
Expected to Report
Jan 3
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
2017 has been a perfect year for Constellation Brands (STZ), as its stock has jumped from $160 to $216 after breaking out in February. Profit growth the last 4 qtrs has been 38%, 24%, 52% and 40%. The company has crushed profit estimates the last two qtrs and 2017 estimates have increased from $7.52 to $8.37 during the last year. What’s fueling Constellation’s growth is beer and premium alcohol. Constellation Brands is the world’s leader in premium wine and the third largest beer company in the US. 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 STZ 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 — this purchase being the catalyst to propel profits higher, given STZ more money to buy even more wineries/brewerys. Just recently STZ bought a premium whisky line and Florida’s fastest selling beer craft company Funky Buddha. Management also buys back stock and pays $2 in dividends per year. STZ is a hot stock as the company keeps beating the street then upping estimates. But after such a perfect year, this stock could take a breather and digest its gains. The P/E of 26 is a little high for a stock with a 17% estimates long term growth rate. And since profits have been so good the last 4 qtrs, growth might slow the next 4 qtrs. Analysts estimate profits growing an average of 7% the next 4 qtrs. I imagine STZ will beat that (fo sho) but will 15% or 20% growth keep the stock climbing? I dunno. Still, this is a fantastic stock long term, it’s just the one-year chart is a little too perfect.
One Year Chart
Look at how solid this move higher has been. Without correcting. And Estimates are for -5%, 18%, 6% and 9% profit growth the next 4 qtrs. I’m pretty sure STZ will beat due to stock buybacks alone. But some might say a P/E of 26 is high for the stock. I kinda think the stock just needs to base a qtr or so and catch its breath.
Fair Value
This stock had a P/E of 22 the last two years. When profit growth was amazing. My Fair Value is a P/E of 24. That gives us a Fair Value of $222 for next year, slightly above the recent price of $216.
Bottom Line
Constellation Brands is a marvel, but the quick surge in the stock price has made STZ extended a bit. With profit growth expected to slow, I can imagine a little selloff or correction. But on the other hand the company has whipped profit estimates the past two qtrs, and that could continue. Constellation Brands is one of my favorite companies. I wish to add it to the Aggressive Growth Portfolio, but I want to wait a bit. STZ ranks 15th in the Growth Portfolio Power Rankings.
Power Rankings
Growth Stock Portfolio
15 of 35
Aggressive Growth Portfolio
N/A
Conservative Stock Portfolio
