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Constellation Brands (STZ) Peaks on Robust Q4 Earnings

There seems to be no looking back for Constellation Brands Inc. STZ, which continues to ride on brand strength, strategic initiatives and robust quarterly results. Evidently, the shares of this leading alcohol company hit the 52-week high mark of $175.43 on Apr 6, after the company reported yet another quarter of splendid earnings and sales results.

In fourth-quarter 2016, both the top line and bottom line topped estimates and improved year over year. While the quarter marked the company’s 10th consecutive earnings beat, Constellation Brands surpassed sales estimates for six straight quarters now. Results improved owing to the company’s effective integration and growth of recently acquired brands, higher margins across its portfolio along with strong consumer demand. Further, strength in its beer business in particular helped the beat.

The overall effect of the positive surprise trend is clearly visible in the company’s year-to-date stock performance. This Zacks Rank #2 (Buy) stock has gained 12% year to date, outperforming the Zacks categorized Beverages – Alcohol industry’s growth of 6.9%.

What’s Driving the Stock?

Apart from the robust fourth-quarter results, the company’s encouraging fiscal 2018 earnings outlook inspires optimism. The company remains focused on achieving adjusted earnings per share growth that surpasses the previously anticipated target of at least 10%. It envisions adjusted earnings guidance in the range of $7.70–$8.00 per share, while reported earnings per share are anticipated in the range of $7.65–$7.95.

Moreover, the company anticipates beer business sales to grow 9–11% in fiscal 2018, while sales for the wine and spirits business is expected to decline 4–6%. These estimates include the anticipated impact from the divestiture of the Canadian wine business and the benefits from High West, Charles Smith and Prisoner acquisitions.

Furthermore, the company is well positioned to gain from consistent focus on brand building, strengthening of beer business and initiatives to include new products in the wine and spirits category. Owing to these strategic endeavors, the company is witnessing robust depletion trends and increasing market share in the U.S. wine and spirits category. Moreover, the company’s efforts to drive business growth through acquisitions remain laudable.

Key Picks

Some other favorably placed stocks in the same industry include Pernod Ricard SA PDRDY sporting a Zacks Rank #1 (Strong Buy), Castle Brands Inc. ROX and Heineken N.V. HEINY, both carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pernod Ricard has gained nearly 9.9% year to date. Moreover, it has a long-term earnings growth rate of 6%.

Castle Brands has surged a whopping 118.4% year to date.

Heineken has jumped 13.7% year to date. Further, the company has a long-term earnings growth rate of 7.6%.

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Constellation Brands Inc (STZ): Free Stock Analysis Report
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