Constellation Brands, Inc. STZ appears promising on the back of its strategic endeavors. Additionally, the company has been gaining from its efforts to drive consumer demand, solid focus on buyouts and continued strength in the beer business. The stock boasts an impressive earnings surprise history as well.
Driven by the aforementioned factors, the company returned 48.9% in the past year, outperforming the industry’s growth of 23%. This Zacks Rank #2 (Buy) stock also exhibits a Growth Score of B with an impressive long-term earnings growth rate of 18.4%.
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Let’s dive deep into the factors that are pushing the stock higher.
Robust Surprise History and Outlook
Constellation Brands has to its credit a robust surprise history. Apparently, the company’s second-quarter fiscal 2018 earnings marked 12th straight earnings beat and 17th consecutive quarter of year-over-year improvement. Also, the top line outpaced the Zacks Consensus Estimate in seven of the trailing eight quarters.
Meanwhile, management remains encouraged with the superb second-quarter results, which was reflected in significant market share gains, margin expansion, strong free cash flow and solid execution. This along with strength in the beer business led management to raise earnings outlook for fiscal 2018, which is envisioned in the range of $8.25-$8.40 per share. The Zacks Consensus Estimate for the fiscal is pegged higher at $8.43.
Focus on Business Expansion
Constellation Brands remains focused on expanding operations directed toward achieving business growth. In the beer segment, the company’s expansion plans are anchored by the acquisition of the Funky Buddha Brewery; the introduction of Fathom IPA by Ballast Point Brewery; the Obregon Brewery acquisition, which will bolster its high-end Mexican beer portfolio; the faster-than-expected 25 million hectares expansion of its Nava brewery in Mexico; and the construction of the East Coast brewery in Belleville, VA.
Moreover, the company is on track with its glass plant expansion. It also sees immense growth potential for its spirits and wines business, which in turn might prove to be beneficial.
Brand Strength
Armed with a formidable portfolio of well-known brands, Constellation Brands is the leading wine company in the world. Moreover, it holds a dominant position in the premium wine and beer segment in the United States. The company is also a leading producer of wine in Canada and New Zealand. This provides it with a competitive edge and also bolsters its well-established position in the market.
Other Catalysts
Constellation Brands’ consistent focus on brand building and its initiatives to include new products are the key revenue drivers. Owing to its strategic endeavors, the company is witnessing increasing market share, especially in the U.S. beer category.
Notably, the company was the highest growth contributor in the U.S. beer category for the fourth straight year, in fiscal 2017. Also, it is focused on expanding in the craft beer space, which has become a solid growth avenue in the beer space. In this regard, management expects solid results from its Ballast Point craft beer brand, which is currently placed among the top 20 craft brands nationwide.
Furthermore, the company is making meaningful leadership changes in an attempt to bring about innovations and improve its operational activities. Also, it is focused on enhancing points of distribution at retail and effectively executing its strategic merchandising initiatives to boost sales. Alongside, Constellation Brands expects to enhance shareholders’ value in the future backed by continued strength in its cash generating ability and sustained growth.
Banking on these above factors, Constellation Brands emerged as a lucrative investment opportunity for investors and definitely deserves a place in your portfolio.
Do Alcoholic Stocks Appeal You, Check These
Other favorably-placed Alcoholic stocks are The Boston Beer Company, Inc. SAM, Brown-Forman Corporation BF.B and Craft Brew Alliance, Inc. BREW.
Boston Beer, with a long-term earnings growth rate of 5% has an average positive earnings surprise of 63.4% in the last four quarters. Also, the stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Craft Brew Alliance, a Zacks Rank #2 stock, has come up with an impressive average positive earnings surprise of 250.2% in the trailing four quarters.
Brown-Forman carries a Zacks Rank #2 and has delivered a positive earnings surprise of 17% in the last quarter.
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