Stephen Quickel - US Investment Report

02/22/2017 9:55 am EST


Stephen Quickel

Editor, US Investment Report

Constellation Brands (STZ) is a turnaround play in the stock of a large company with $7 billion in sales that skidded from $170 to $150. Its price had ballooned as investors sought haven in established growth stocks.

Constellation Brands is one of the world’s largest producers and marketers of alcoholic beverages, with worldwide distribution and widely recognized brands. 

Its Wine & Spirits division deals in more than 100 brands produced by 30 wineries on 17,000 acres of vineyards. They include such leading names as Robert Mondavi, Clos du Bois, Ruffino, Sveda and Casa Noble. Its Beer division, the third-largest beer marketer in the US market, imports numerous high-end beers lead by Corona Extra and Corona Light, the No.1 and 2 imports.

As for growth, the seven Wall Street analysts covering Constellation see its earnings rising by an average of 19.5% a year over the coming five years—or about twice the bottom-line growth of the S&P 500 stocks. Five of the seven now rate STZ as a Strong Buy, and the other two call it a Buy. Their average target price is $187. 

At today’s $155, its valuations are reasonable for an established growth company in this market—at 20 times forward earnings and a PEG ratio of 1.09, within the 0.90-to-1.10 ideal range. Our own near-term target is $188, but in a strong market STZ could reach $200 within the coming year.

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