Constellation Brands Inc. (STZ - Free Report) has long been focused on building its brands portfolio and at the same time exiting underperforming businesses. In one such endeavor, the company successfully completed the previously announced sale of its Canadian Wine business to Ontario Teachers' Pension Plan, which is Canada’s largest single-profession pension plan.
The sale transaction was valued at about C$1.03 billion, while Constellation Brands received C$765 million in cash, after accounting for debt repayment and closing adjustments.
Under the sale, the company disposed its Canadian wine brands like Jackson-Triggs and Inniskillin, vineyards, facilities, wineries, offices, along with Wine Rack retail stores.
In a bid to focus on high margin brands, Constellation Brands first announced plans to assess the impact of an initial public offering for part of its Canadian wine space, in Apr 2016. However, the aforementioned deal reflects the company’s intention of doing away with its entire Canadian wine business, in an attempt to enhance shareholder value.
Ontario Teachers' Pension Plan is likely to be a perfect growth opportunity for these Canadian wine brands, given the former’s robust experience. Nonetheless, Constellation Brands will retain the ownership of its Black Velvet Whisky and the associated production facility – located in Lethbridge, Alberta, Canada.
Building on its wine portfolio, the company acquired Charles Smith Wines collection for roughly $120 million in Oct 2016. This deal adds Charles Smith’s five premium wine brands to Constellation Brands’ portfolio, including Kung Fu Girl Riesling, Velvet Devil Merlot, Boom Boom! Syrah, Eve Chardonnay and Chateau Smith Cabernet Sauvignon. These brands, which have displayed double-digit volume growth in the last three years, enjoy solid market demand and are likely to strengthen Constellation Brands’ existing position as the second leading supplier of Washington State wines.
Constellation Brands’ consistent focus on brand building and its initiatives to include new products in its portfolio are key revenue drivers for the stock. Owing to its strategic endeavors, the company is witnessing robust depletion trends and increasing market share in the U.S. wine and spirits category. This was demonstrated by double-digit depletion growth, at each of its recently acquired brands, in second-quarter fiscal 2017.
Gaining from its strategic endeavors, Constellation Brands has seen its shares outperform the Zacks categorized Beverages-Alcoholic industry. While shares of Constellation Brands have recorded a year-to-date growth of nearly 10.1%, the broader industry has slumped 4.5% in the same period.
Zacks Rank & Other Key Picks
Constellation Brands currently boasts a Zacks Rank #2 (Buy). Other well-ranked stocks in the broader consumer staples sector include Dean Foods Co. (DF - Free Report) , Ollie's Bargain Outlet Holdings Inc. (OLLI - Free Report) , both sporting a Zacks Rank #1 (Strong Buy) and Sysco Corporation (SYY - Free Report) which carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Dean Foods, with a long-term earnings growth rate of 12%, has surged nearly 27.8% year to date.
Ollie's Bargain has gained a whopping 77% year to date. Moreover, it has a long-term earnings growth rate of 18.9%.
Sysco has jumped nearly 38.1% year to date. The stock has a long-term earnings growth rate of 8.8%.
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