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What Makes Constellation Brands (STZ) a Promising Stock?

Zacks Equity Research
Updated

Constellation Brands, Inc. STZ has been in green territory for quite some time now as it looks appeasing on the back of its sturdy portfolio, robust strategies and impressive earnings history. In fact, the company is poised to gain from its solid industry trends as well.

Markedly, this Zacks Rank #2 (Buy) stock has a long-term earnings growth rate of 18.2%, ahead of the industry’s growth rate of 17.1%.

Shares of Constellation Brands have rallied 28.6% in the last six months, comfortably outperforming the industry’s growth of 16.7%. Currently, the industry is placed at the top 8% of the Zacks classified industries (21 out of 256). Also, its shares have outpaced the broader Consumer Staples sector’s gain of 4.6%, which is placed at the top 44% of the Zacks classified sectors (7 out of 16).



Let’s Find Out More

Strategic Endeavors

Armed with a formidable portfolio of well-known brands, Constellation Brands is the leading wine company in the world and holds a dominant position in the premium wine and beer segment in the United States. This provides it with a competitive edge and also bolsters its well-established position in the market.

In fact, the company’s consistent focus on brand building and its initiatives to include new products are the key revenue drivers. In this regard, Constellation Brands is witnessing increasing market share, especially in the U.S. beer category and was the highest growth contributor in the same category for the fourth straight year, in fiscal 2017.

Additionally, the company is focused on expanding in the craft beer space that has become a solid growth avenue in the beer space. Going forward, management also expects impressive results from its Ballast Point craft beer brand, which is currently placed among the top 20 craft brands nationwide.

Meanwhile, Constellation Brands is expanding operations via acquisitions directed toward achieving business growth and remains on track with its glass plant expansion.

Impressive Earnings Streak

Constellation Brands’ earnings have outpaced the Zacks Consensus Estimate for the 11th straight quarter in first-quarter fiscal 2018. It has delivered an average positive earnings surprise of 11.7% in the trailing four quarters.

Gaining From Industry Trends

Albeit the prohibitions on drinking, recent observations unveil that alcohol sales trends have been witnessing a change with a higher demand for flavored products and tequilas. In fact, the industry has recently seen the spirits segment gaining traction, accounting for nearly 36% of the total alcohol market.

Consequently, the Alcoholic Beverages industry has gained 16.7% in the last six months, compared with the S&P 500 market’s growth of 4.9%.



Furthermore, a recent trend analysis reveals that the craft beer segment has almost matured and spirits lovers are now looking for the craft essence in spirits. Therefore, there has been a rise of craft distilleries in the industry and Constellation Brands is looking to explore the craft spirits segment. Evidently, the company acquired and integrated High West Distillery, Charles Smith Wines and The Prisoner Wine Company brands, which marked its entry in the premium craft whiskey space. Also, the company has made small investments in Catoctin Creek Distilling Company and Bardstown Bourbon Company.

Hence, we believe that Constellation Brands is well-positioned to gain from these ongoing industry trends.

Looking for More? Check These Three Trending Stocks

Some other top-ranked stocks in the same industry include The Boston Beer Company, Inc. SAM, Craft Brew Alliance, Inc. BREW and Brown-Forman Corporation BF.B.

Boston Beer has pulled off an average positive earnings surprise of 50% in the last four quarters. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Craft Brew, a Zacks Rank #1 stock, has delivered an impressive average positive earnings surprise of 222.7% in the trailing four quarters.

Brown-Forman has delivered positive earnings surprise of 18% in the last quarter and carries a Zacks Rank #2.

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Brown Forman Corporation (BF.B) : Free Stock Analysis Report
 
Constellation Brands Inc (STZ) : Free Stock Analysis Report
 
Craft Brew Alliance, Inc. (BREW) : Free Stock Analysis Report
 
Boston Beer Company, Inc. (The) (SAM) : Free Stock Analysis Report
 
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