Constellation Brands Inc. (STZ) - Time to drink up
02-15-07: Constellation Brands Inc. (STZ) is one of the largest producer and distributor of alcoholic beverages. The company produces and distributes many of the well known brands alcoholic beverages. Its 200-plus brands range from jug wines to coveted California reds such as Ravenswood and Estancia, beer imports from Corona to St. Pauli Girl, and liquors like Skol gin and Black Velvet Canadian whiskey. It owns 10 brands of vodka including Fleishmann's, Barton and Glenmore (AP, 2007). STZ competes head to head with Anheuser-Busch (BUD).On January 3rd, 2007, the company disappointed Wall Street by 2 cents, posting 58 cents versus the expected 60 cents per share. As a result, the stock dropped from $29 to $24 per share. The decline in STZ share has caught our attention. After going over the company’s financials and watching the stock’s movement for over a month, we believed it is now the right time to finally get into this stock.
Trading at $24.50, we believed this is an opportunity to buy as the stock appears to have bottomed. In our opinion, the recent concern over slow wine sales is overblown. Recent studies suggest wine is gaining popularity and should continue to grow in the U.S and abroad. Given the stock is trading at a discount and the negative sentiment is already priced into the stock, we view the current valuation as an opportunity. Any positive outlook or signs should lift the stock higher.
Long term prospect for STZ is bright as the alcoholic beverages business can withstand any economic condition. The purchase of SVEDKA Vodka for $384 million should benefit STZ long term growth prospect.
In our opinion, this is a recession proof stock. People will drink no matter the state of the economy. In fact, people will likely drink a lot more when the economy is bad. From our view, this is an opportunity to buy a good company with sound business at a discount. We see STZ trading above $30 per share by December, 2007.
Comments
The only brand they can boast of is Corona. Never heard of anythnig else from their portfolio. Only reason to buy the stock is that it drop 4 points. Otherwise the company's got nothing in it for the long term.
Posted by: prads | February 15, 2007 01:03 PM
Actually, they have much more than the brands mentioned. If you take the time to look at their site, you'll find stz owns a load of brands that you probably don't even realized.
Posted by: John | February 16, 2007 04:10 PM
Oh my goodness. i brought the $24.50 and it drop so much today.. im hurting bad..
Posted by: Ron mexico | March 1, 2007 12:54 PM
Ron, STZ is certainly a disappointment today. Their lower guidance made things worse in this market. We are in a lot of pain with STZ as well. Hopefully it will recover soon. Good Luck, Friend.
Posted by: ibooyah | March 1, 2007 01:00 PM