On Oct 10, 2013, we upgraded
Constellation Brands Inc.
) 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.
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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
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
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
Molson Coors Brewing Company
Boston Beer Co. Inc.
). All of these carry a Zacks Rank #2 (Buy).