On Jun 12, 2013, Zacks Investment Research upgraded
Constellation Brands Inc.
) to a Zacks Rank #1 (Strong Buy). Shares of this alcoholic
beverage company have amassed an impressive year-to-date return
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Why the Upgrade?
Constellation Brands gained investor confidence following the
completion of its recent acquisition of
Grupo Modelo, S.A.B. de C.V.
) U.S. beer business from
) for approximately $4.75 billion. As part of the deal,
Constellation Brands acquired Grupo Modelo's Piedras Negras
brewery in Nava, Mexico; Grupo Modelo's 50% stake in Crown
Imports LLC; perpetual rights to market and sell Corona and other
Grupo Modelo's brands currently distributed by Crown in the U.S.;
and the autonomy to develop new products and line extensions
within the portfolio of brands for the U.S. market.
Following the completion of the transaction, Constellation Brands
is now an independent brewer and marketer of beer in the U.S. and
will operate under two divisions: a beer division and a wine and
spirits division. The company will now sell all brands in Crown's
portfolio including Corona Extra, Corona Light, Modelo Especial,
Negra Modelo, Pacifico and Victoria from Mexico and Tsingtao from
Additionally, Constellation has signed a 3-year agreement with AB
InBev to carry out the smooth transition of operations of the
Piedras Negras brewery. In this transition period, Constellation
is committed to spending $500-$600 million toward the expansion
of this facility in order to double its current capacity to meet
the projected demand for products in the U.S.
Moreover, we remain impressed by the company's record of beating
quarterly earnings expectations, sustained focus on brand
building and initiatives to introduce new products in its wine
and spirits business.
Looking at the surprise history, Constellation Brands has
outperformed the Zacks Consensus Estimate for 4 straight quarters
by an average of 13.3%. The recent fourth-quarter fiscal 2013
results added to the company's upbeat performance with adjusted
earnings of 47 cents per share surpassing the Zacks Consensus
Estimate by a couple of cents.
Further, we believe that Constellation Brands with its formidable
portfolio of well-known brands, new product offerings and
strategic initiatives to strengthen its foothold in the U.S.,
holds a promising future. Moreover, the company is enhancing its
points of distribution in retail and is well executing its
strategic merchandising initiatives, which will bolster sales.
Other Stocks to Consider
Other well performing stocks in the beverages-alcohol industry
are Anheuser-Busch InBev, Grupo Modelo, S.A.B. de C.V. and
). All these stocks hold a Zacks Rank #2 (Buy).