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Analyst Blog

Shares of Constellation Brands Inc. (STZ - Analyst Report) reached a new 52-week high of $71.62 yesterday but it closed the trading session at $70.08. Apart from strong second-quarter fiscal 2014 results and an upbeat guidance, the stock has been performing well on the back of brand building and inorganic growth initiatives. Notably, this beverage company has amassed a year-to-date return of 86.6%.

The average volume of shares traded over the last 3 months was approximately 1,497K. Moreover, the company currently trades at a forward P/E of 23.5x, a 4% discount to the peer group average of 24.48x. The last traded price is 6.3% below the Zacks Consensus average analyst price target of $74.83.

Additionally, the company’s long-term estimated earnings per share (EPS) growth rate is 14.9%, substantially higher than the peer group average of 10.6%. At present, this leading premium wine retailer has a Zacks Rank #2 (Buy).

Constellation Brands’ sustained focus on brand building and initiatives to introduce new products in the wine and spirits business are the major factors behind the stock’s momentum. This is well evident from the company’s recent acquisition of Grupo Modelo SAB de C.V.’s U.S. beer business from Anheuser-Busch InBev SA/NV (BUD - Snapshot Report). Moreover, Constellation Brands is enhancing its distribution channels in retail and is effectively implementing strategic merchandising initiatives to augment sales.

Considering the positive impact from the recent acquisition of Grupo Modelo and strong second quarter results, management raised its guidance for fiscal 2014. Constellation Brands 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. Currently, the Zacks Consensus Estimate stands at $2.98, which lies near the higher end of the guidance range.

Apart from Constellation Brands, other stocks like The Walt Disney Company (DIS - Analyst Report) and Dollar General Corporation (DG - Analyst Report) achieved new 52-week highs of $72.13 and $61.82 respectively, on Dec 11, 2013.

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