Constellation Brands (STZ) is a Fortune 500® company and a leading international producer and marketer of beer, wine and spirits with operations in the U.S., Mexico, Canada, New Zealand and Italy. Constellation is the third-largest producer and marketer of beer for the U.S. market. The company’s high-end, iconic imported brands include Corona Extra, Corona Light, Modelo Especial, Modelo Negra and Pacifico. The portfolio also includes Ballast Point, one of the most awarded craft brewers in the U.S. In addition, Constellation is the world’s leader in premium wine, selling great brands including Robert Mondavi, Clos du Bois, Kim Crawford, Meiomi, Mark West, Franciscan Estate, Ruffino and The Prisoner. The company’s premium spirits brands include SVEDKA Vodka, Casa Noble Tequila and High West Whiskey.
The company’s fundamentals are strong! As of the most recent quarter, the company’s market cap is .57 billion with a forward P/E ratio of 23.57 (A good sign; level P/E ratios common in mature industries like this; Beta of -0.01) compared to an alcoholic beverage sector average of 23.27 and an S&P 500 average of 23.28. Their revenue amount to .46 billion. Organic net sales rose 8% to .07 billion, beer segment sales increase 12.8% to 1.38 billion, wine and spirits sales fell 11.7% to 705.6 million, and they improved adjusted earnings guidance to .25-.40 per share from .90-.10. This is their 12th straight earnings beat and 17th consecutive quarter of year-over-year improvement (40% increase at .47 per share) In the past five years, STZ’s stock price has failed to increase, per quarter, only three times. Acquisitions fuel strategic growth, especially in the craft beer segment. In August, they acquired Funky Buddha Brewery, a craft brewery in Florida. Previously acquired Ballast Point Brewery ( billion purchase).
Furthermore, they purchased a 9.9 percent stake (~5 million) in Canopy, a world-leading provider of medical marijuana. Increased legalization of recreational marijuana equates to lower beer and spirits sales, so this is a smart move. In addition, seven states and Washington, D.C., allow such marijuana use, and Canada is working out details to do the same. Soon, many, if not all, of the other states will follow and the cannabis market is expected to hit a lofty billion by 2026, according to Cowen.
Finally, Senate Republicans are proposing significant excise tax reductions for wine, liquor, and beer. Only downside is it would only last two years, so the Republicans are proposing extensions (Would begin December 31, 2017 to December 31, 2019). This would be the first distilled spirits tax reduction since the Civil War if approved (Potential 0 million generated from this, will be reinvested back into businesses which is good for investors)…
As promised, here is the link to my Seeking Alpha article for more in-depth analysis on STZ.
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