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What Moody’s Thinks of Constellation Brands

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Price movement

Constellation Brands (STZ) has a market cap of $31.6 billion. It fell 0.68% to close at $152.87 per share on November 10, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -4.3%, -9.9%, and 8.4%, respectively, on the same day. STZ is trading 7.5% below its 20-day moving average, 7.6% below its 50-day moving average, and 2.7% below its 200-day moving average.

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Related ETF and peers

The iShares Russell 3000 ETF (IWV) invests 0.12% of its holdings in Constellation Brands. The ETF tracks a cap-weighted index that measures the investable US equities market, covering the entire market-cap spectrum, including micro-caps. The YTD price movement of IWV was 8.1% on November 10.

The market caps of Constellation Brands’s competitors are as follows:

  • Anheuser-Busch InBev SA-ADR (BUD) — $186.5 billion
  • Molson Coors Brewing (TAP) — $21.5 billion

Latest news on Constellation Brands

In a press release, Moody’s notes, “Moody’s Investors Service today placed the Ba1 Corporate Family and other ratings of Constellation Brands, Inc. (“Constellation”) on review for upgrade following its announcement that it will manage its net debt to EBITDA to around 3.5x. At the same time, Moody’s raised Constellation Brand’ speculative grade liquidity rating to SGL-1 from SGL-3.”

The release added, “The rating review will focus on the company’s ongoing financial policy, including the likely shareholder return strategy going forward and the potential risk of ongoing M&A activity. The review will also assess the exposure to political risk resulting from the company’s reliance on Mexico for its beer production.

“Moody’s will consider both the company’s geographic sales focus on the US, and its growing concentration on premium alcoholic beverages.”

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Constellation Brands’s performance in fiscal 2Q17

Constellation Brands (STZ) reported fiscal 2Q17 net sales of $2.0 billion, which is a rise of 17.6% over its net sales of $1.7 billion in fiscal 2Q16. The company’s net income, EPS (earnings per share) of Class A common stock, and EPS of Class B convertible common stock rose to $358.9 million, $1.75, and $1.61, respectively, in fiscal 2Q17, as compared to $302.4 million, $1.49, and $1.38, respectively, in fiscal 2Q16.

The company reported non-GAAP[1. generally accepted accounting principles] EPS of $1.77 in fiscal 2Q17, which is a rise of 13.5% over fiscal 2Q16.

STZ’s cash and cash equivalents and inventories rose 113.4% and 0.19%, respectively, between fiscal 4Q16 and fiscal 2Q17. Its current ratio rose to 1.4x, and its debt-to-equity ratio fell to 1.47x in fiscal 2Q17, as compared to 1.3x and 1.54x, respectively, in fiscal 4Q16.

Projections

Constellation Brands (STZ) made the following projections for fiscal 2017:

  • net sales growth of the Beer segment in the range of 16%–17%, including an incremental benefit from the Ballast Point acquisition
  • net sales growth of the Wine & Spirits business in the mid-single-digit range and operating income growth in the mid- to high-single-digit range
  • EPS of $6.25–$6.40 on a reported basis and $6.30–$6.45 on a comparable basis

Next, we’ll look at Skechers USA (SKX).

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