Constellation Brands has reason to celebrate

Posted Oct 1st 2009 5:40PM by John Jagerson

Constellation Brands, Inc. (NYSE: STZ) manufactures a variety of alcoholic beverages for several prominent brands and has reason to celebrate a surprisingly good earnings report today. The firm's EPS of $.54 was much higher than the $.41 analysts expected.

According to the company, much of the excess profitability was due to lower restructuring costs this quarter. Overall sales were down partially due to a stronger dollar and a trend amongst the drinking public to purchase lower priced products.

Constellation has been moving further into the premium brands market where margins are higher but the recession has stunted that particular strategy. As investors save more and spend less, brands like St. Pauli beers and Svedka vodka may languish in favor of lower priced domestics.

The stock for Constellation Brands (NYSE: STZ) has not been able to outperform the broad stock indexes since the beginning of the year, which may continue to be an issue if economic recovery does turn out to be sluggish. Overall the news seems good but there are still some problems.

John Jagerson is an analyst with Learning Markets, LLC

Tags: beer, drinking, earnings