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Constellation Brands’ Prospects Bright: Should You Add?


Constellation Brands Inc. STZ seems to be riding on its brand strength, strategic initiatives and splendid third-quarter fiscal 2017 results. The company boasts a robust portfolio of well known brands and is amongst the largest wine company in the world. In addition, it has a dominant position in the premium wine and beer segment in the U.S.

Constellation Brands’ focus on brand building and its initiatives to include new products in its wine and spirits business are key revenue drivers for the company. Moreover, it has been witnessing robust depletion trends and increasing market share in the U.S. wine and spirits category.

Sturdy Performance Leads the Way

Coming to its quarterly performance, Constellation Brands posted stellar third-quarter fiscal 2017 results, wherein both the top and bottom lines registered double-digit growth and exceeded expectations. Notably, the quarter marked the company’s ninth and seventh straight earnings and sales beat, respectively. In the trailing four quarters, it posted an average earnings surprise of 6.7%. (Read more: Constellation Brands Raises View on Q3 Earnings Beat)

Constellation Brands Inc Price and Consensus

Constellation Brands Inc Price and Consensus | Constellation Brands Inc Quote

Following an outstanding quarter, management raised its fiscal 2017 adjusted earnings guidance in the range of $6.55–$6.65 per share from $6.30–$6.45 projected earlier. Consequently, the Zacks Consensus Estimate for fiscal 2017 and fiscal 2018 has increased 20 cents to $6.64 and 6 cents to $7.53, respectively, in the past 30 days.

Strategic Endeavors Undertaken

Recent actions made in the quarter under review include Constellation Brands’ small investments in Catoctin Creek Distilling Company and Bardstown Bourbon Company, as well as the Charles Smith Wines and High West Distillery buyouts. This apart, it completed the sale of its Canadian Wine business to Ontario Teachers' Pension Plan.

Further, Constellation Brands agreed to buy Obregon Brewery from Grupo Modelo, a subsidiary of Anheuser-Busch InBev SA/NV BUD. The brewery is expected to generate nearly four million hectoliters of production capacity, enabling the company to capture immediate functional brewery capacity that will help serve its high-end Mexican beer portfolio. We believe that these moves are likely to boost its performance, moving forward.

Bottom Line

We observed that this Zacks Rank #2 (Buy) stock has outperformed the Zacks categorized Beverages-Alcoholic industry, which occupies space in the bottom 50% of the Zacks classified industries. In the past one year, the company’s shares have increased 3% compared with the Zacks categorized industry’s gain of 1.8%. In addition, the stock’s VGM Score of “B” with a long-term earnings growth rate of 19%, highlights its growth potential.

Stocks You May Consider

Some other stocks in the broader Consumer Staples sector with a Zacks Rank #2 are Archer-Daniels-Midland Company ADM and Pinnacle Foods Inc. PF. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Archer Daniels, with a long-term earnings growth rate of 8.5%, surged 30.2% in the past one year.

Pinnacle Foods with a long-term earnings growth rate of 6.5%, gained 25.5% in the past one year.

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