Constellation Brands Upped to Outperform

On Jan 22, we upgraded the largest wine company in the world, Constellation Brands Inc. ( STZ - Analyst Report ) to Outperform based on the company’s strong third quarter fiscal 2013 results and increased visibility on the Crown deal, which is expected to close during the first quarter of calendar year 2013.

Why the Upgrade?

Constellation Brands posted another strong quarter, with a positive earnings surprise of 14.6%. The company’s third-quarter earnings came in at 63 cents a share, up 21% from the year-ago quarter’s earnings, marking the fourth consecutive quarter of positive earnings surprises with an average beat of 32.5%. Following the strong results, the company raised its fiscal 2013 adjusted earnings guidance to $2.10–$2.20 per share from its earlier projection of $2.00–$2.10 per share.

Following the release of third quarter results, the Zacks Consensus Estimate for the fourth quarter and fiscal 2013 increased by 7.1% and 4.8% to 45 cents and $2.18, respectively.

The strong positive bias on this Zacks Rank #2 (Buy) company comes from its continued focus on brand building initiatives and product innovations in its wine and spirits business. These efforts are expected to drive the company’s revenues. Owing to its strategic endeavors, the company is witnessing robust depletion trends and increasing market share in the U.S. wine and spirits category. Moreover, the company is enhancing its points of distribution at retail and is well executing its strategic merchandising initiatives that will facilitate it to augment sales.

Other Stocks to Consider

Besides Constellation Brands, other stocks in the beer and wine industry that are performing well include Boston Beer Co. Inc. ( SAM - Snapshot Report ) and Compania Cervecerias Unidas S.A. ( CCU - Snapshot Report ) , both carrying a Zacks Rank #1 (Strong Buy). Brown-Forman Corporation ( BF.B - Analyst Report ) , which holds a Zacks Rank #2, is also worthy of a consideration.