Constellation Brands (NYSE: STZ) produces
and markets more than 250 brands of wine, spirits and beer, in about 150 countries. The Wines division, the largest maker of wine by volume in the world, is responsible for such brands as Robert Mondavi, Inniskillin, Simi, Arbor Mist and Blackthorn (cider). The Spirits division distills such brands as Black Velvet, Chi-Chi's, Fleischmann's, Canadian LTD and Mr. Boston. The Imports division has the right to import, market, and sell Corona Extra, Corona Light, Tsingtao, Modelo Especial, Pacifico and St. Pauli Girl. The firm distributes its products through wholesalers, government beverage control agencies and various retailers. Diageo (NYSE: DEO) and Fortune Brands (NYSE: FO) are major competitors.
The company pleased investors earlier in the week, when it reported fiscal Q1 EPS of 34 cents and revenues of $931.8 million. Analysts had been looking for 31 cents and $906.1 million. The highlight of the quarter was a 24% year over year rise in branded wine net sales. Management also guided FY09 EPS to $1.68-$1.76, versus consensus of $1.70.
STZ shares
popped on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with two "strong buys", eight "holds" and one "underperform". The STZ P/E ratio (11.29), PEG ratio (1.00), Price to Sales ratio (1.15), Price to Book ratio (1.55), Price to Cash Flow ratio (12.05) and Price to Free Cash Flow ratio (11.49) compare favorably with industry, sector and S&P 500 averages. Institutions own about 85% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $17.21 and $26.46. A stop-loss of $18.25 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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