Yesterday, the shares of Constellation Brands Inc. (STZ) reached a new 52-week high of $39.65, beating its previous 52-week high of $38.99 attained on Jan 17. Continued synergies from the sturdy third-quarter fiscal 2013 performance and a strong outlook facilitated a consistent rise in volumes traded of Constellation Brands, which drove the shares to hit the 52-week high mark twice in a span of 12 days.
Average volume of shares traded over the last 3 months stands at approximately 1,904,990. This Zacks Rank #2 (Buy) beverage company closed trade at $39.42 on Jan 29, representing a solid return of approximately 37.6% over the past six months.
Drivers That Triggered Momentum
An impressive record of beating the quarterly earnings expectations, an upbeat fiscal 2013 outlook, a sustained focus on brand building as well as initiatives to bring in new products in its wine and spirits business, are the major attributes that pushed the shares of Constellation Brands to a new high.
The recent third-quarter fiscal 2013 results have added to its streak of upbeat performances. Constellation Brands posted adjusted earnings of 63 cents per share that surged over 21% from the year-ago quarter and surpassed the Zacks Consensus Estimate of 55 cents, primarily driven by increased sales and improved margins.
Net sales in the quarter increased 9% to $766.9 million from the year-ago quarter and also came ahead of the Zacks Consensus Estimate of $744.0 million. Net sales gained on the back of higher volumes and better product mix.
Bolstered by strong quarterly performance, the company raised its fiscal 2013 adjusted earnings guidance to a range of $2.10 to $2.20 per share, up from the earlier projection of $2.00 to $2.10.
Besides Constellation Brands, other beverage-alcohol companies like Companhia de Bebidas Das Americas, or AmBev (ABV), Brown-Forman Corporation (BF.B) and Beam Inc. (BEAM) posted robust earnings results in the recently reported quarters.
Further, we believe that Constellation Brands’ continued focus on brand building and enhancing market share through acquisitions are accelerating its growth opportunities. During calendar year 2012, Constellation Brands acquired the remaining 50% stake in Crown and the California-based Mark West wine brand.
Stock’s Key Indicators
From valuation perspective, Constellation Brands looks compelling, suggesting further room for growth. The stock currently trades at a forward P/E of 18.1x, 8.6% discount to the peer group average of 19.8x. Both price-to-book and price-to-sales ratios stand at 2.6, in line with the peer group average.
Moreover, the company’s return-on-equity (ROE) and return-on-asset (ROA) are 17.9% and 6.1%, respectively, which are higher than the peer group averages. The company’s strong fundamentals are well supported by its long-term estimated EPS growth rate of 10.9%.