Shares of Constellation Brands Inc. (STZ) soared to a new 52-week high of $44.99 on Monday, Feb 25, as the company continues to gain from the sturdy third-quarter fiscal 2013 performance and a strong outlook. Further, a consistent rise in volumes traded is driving the stock up the charts of late. Average volume of shares traded over the last 3 months stands at approximately 4,456,360.
This Zacks Rank #2 (Buy) beverage company closed trade at $43.97 on Feb 25, representing a solid year-to-date return of approximately 17.0%, while gaining about 103.0% over the past year.
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 introduce 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 were 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.
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.
Another beverage-alcohol company that created a new 52-week high recently was Companhia de Bebidas Das Americas, or AmBev (ABV). Besides this, other stocks in the retail space soaring to their all time highs are The Clorox Company (CLX) and Colgate-Palmolive Co. (CL).
Stock’s Key Indicators
From the valuation perspective, Constellation Brands looks compelling. The stock currently trades at a forward P/E of 20.2x, at par with the peer group average. Similarly, both price-to-book and price-to-sales ratios stand at 2.9, 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%.
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