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Constellation Brands (STZ) an Investable Option Right Now?
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Investors must exercise caution when it comes to investing in stocks. They must be aware of the pros and cons embedded in various companies as any improper selection might hurt their returns. Keeping in mind this principle, let’s check out whether Constellation Brands Inc. (STZ - Free Report) provides enough reasons to hold it at least for the near term. Shares of this Zacks Rank #3 (Hold) have increased roughly 10% over the past six months.
Constellation Brands, the largest wine company in the world, has a formidable portfolio of well-known brands. It also holds a predominant position in the premium wine and beer segment in the U.S. Besides, it is a leading producer of wine in Canada and New Zealand. This is further backed by a solid financial position.
Strategies Driving Growth
The company constantly strives to incorporate new products in its wine and spirits business as these are its key revenue driver. Owing to its strategic endeavors, the company is witnessing robust depletion trends and increasing market share in the U.S. wine and spirits category. It is focused on enhancing points of distribution at retail and effectively executing its strategic merchandising initiatives to boost sales.
In an attempt to create value for its shareholders and strengthen the financial position of its Wine and Spirits business, the company is assessing the advantages of executing an initial public offer for a certain portion of its Canadian wine business.
Moreover, it ended fiscal 2016 on a spectacular note, delivering better-than-expected top- and bottom-line results in all four quarters. In fact, the bottom line marked its sixth consecutive quarter of positive surprise, with an average beat of nearly 9%.
The Overhangs
Despite the driving forces, what still makes us cautious on the stock is the stiff competition that the company has to face from other well-established players in the industry, which may dent its operating performance. Its high net debt-to-capitalization ratio may adversely affect its creditworthiness, making it more susceptible to macroeconomic factors. Moreover, it is highly prone to seasonal factors and is at risk of increasing excise taxes.
What Lies Ahead
After concluding fiscal 2016 on a strong note, Constellation Brands provided an encouraging outlook for fiscal 2017. Management had earlier projected adjusted earnings in the range of $6.05–$6.35 per share, higher than $5.43 recorded in fiscal 2016. The current Zacks Consensus Estimate for fiscal 2017 is at $6.29, which has increased 22 cents over the past 90 days.
Constellation Brands is slated to release first-quarter fiscal 2017 results on Jun 30. Our proven model shows that the company is likely to beat earnings estimates. This is because it has a favorable combination of an Earnings ESP of +1.97% and a Zacks Rank #3.
Stocks that Warrant a Look
Some better-ranked stocks in the same industry include Compania Cervecerias Unidas S.A. (CCU - Free Report) , Molson Coors Brewing Co. (TAP - Free Report) and Ambev S.A. (ABEV - Free Report) . While Compania Cervecerias and Molson Coors sport a Zacks Rank #1 (Strong Buy), Ambev hold a Zacks Rank #2 (Buy).
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Constellation Brands (STZ) an Investable Option Right Now?
Investors must exercise caution when it comes to investing in stocks. They must be aware of the pros and cons embedded in various companies as any improper selection might hurt their returns. Keeping in mind this principle, let’s check out whether Constellation Brands Inc. (STZ - Free Report) provides enough reasons to hold it at least for the near term. Shares of this Zacks Rank #3 (Hold) have increased roughly 10% over the past six months.
Constellation Brands, the largest wine company in the world, has a formidable portfolio of well-known brands. It also holds a predominant position in the premium wine and beer segment in the U.S. Besides, it is a leading producer of wine in Canada and New Zealand. This is further backed by a solid financial position.
Strategies Driving Growth
The company constantly strives to incorporate new products in its wine and spirits business as these are its key revenue driver. Owing to its strategic endeavors, the company is witnessing robust depletion trends and increasing market share in the U.S. wine and spirits category. It is focused on enhancing points of distribution at retail and effectively executing its strategic merchandising initiatives to boost sales.
In an attempt to create value for its shareholders and strengthen the financial position of its Wine and Spirits business, the company is assessing the advantages of executing an initial public offer for a certain portion of its Canadian wine business.
Moreover, it ended fiscal 2016 on a spectacular note, delivering better-than-expected top- and bottom-line results in all four quarters. In fact, the bottom line marked its sixth consecutive quarter of positive surprise, with an average beat of nearly 9%.
The Overhangs
Despite the driving forces, what still makes us cautious on the stock is the stiff competition that the company has to face from other well-established players in the industry, which may dent its operating performance. Its high net debt-to-capitalization ratio may adversely affect its creditworthiness, making it more susceptible to macroeconomic factors. Moreover, it is highly prone to seasonal factors and is at risk of increasing excise taxes.
What Lies Ahead
After concluding fiscal 2016 on a strong note, Constellation Brands provided an encouraging outlook for fiscal 2017. Management had earlier projected adjusted earnings in the range of $6.05–$6.35 per share, higher than $5.43 recorded in fiscal 2016. The current Zacks Consensus Estimate for fiscal 2017 is at $6.29, which has increased 22 cents over the past 90 days.
Constellation Brands is slated to release first-quarter fiscal 2017 results on Jun 30. Our proven model shows that the company is likely to beat earnings estimates. This is because it has a favorable combination of an Earnings ESP of +1.97% and a Zacks Rank #3.
Stocks that Warrant a Look
Some better-ranked stocks in the same industry include Compania Cervecerias Unidas S.A. (CCU - Free Report) , Molson Coors Brewing Co. (TAP - Free Report) and Ambev S.A. (ABEV - Free Report) . While Compania Cervecerias and Molson Coors sport a Zacks Rank #1 (Strong Buy), Ambev hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>