Morningstar | Bill Newlands to Take the Helm at Constellation Brands in March; Shares Remain Fairly Valued
Narrow-moat Constellation Brands announced that President and COO Bill Newlands will take its top spot on March 1, 2019, after current CEO Rob Sands steps down from the position. Newlands joined the company in 2015 as its chief growth officer, after more than 30 years of leadership experience in the alcoholic beverage industry (including serving as President, North America at Beam), and became President earlier this year. We weren't surprised by Newlands' appointment, given his substantial knowledge of the company's operations and experience shaping the strategy across its portfolio of beer, wine, and spirits brands. Given Newland's existing role, we aren't anticipating a material change to the company's strategic priorities or capital allocation policies. As a result, we're holding steady on our $204 fair value estimate, which incorporates around 6% revenue growth and mid-30s operating margin on average over our forecast, and Standard stewardship rating.After stepping down, Rob Sands will become executive chair and Richard Sands, his brother and current chairman of the board, will become executive vice chair. We expect the Sands family will continue to have a material influence over the company's operations, as it owns the vast majority of the company's Class B convertible stock (which carries 10 times the voting rights of Class A shares). Despite this ownership structure, we think management will continue to act in the best interests of shareholders, as evidenced by adjusted returns on invested capital averaging north of 20% over the past five years and $1.4 billion returned to shareholders in the form of dividends and share repurchases in fiscal 2018.
Constellation Brands is an international beverage alcohol company. The company is a producer and marketer of beer, wine and spirits with operations in the U.S., Mexico, New Zealand, Italy and Canada. The company has two segments: Beer, in which the company is engaged in the U.S. beer market that includes the imported, craft, domestic super premium, and alternative beverage alcohol categories and it has the right to import, market and sell these Mexican beer brands in the U.S.; and Wine and Spirits, in which its wine portfolio is supported by grapes purchased from independent growers, primarily in the U.S., New Zealand and Chile, and vineyard holdings in the U.S., New Zealand and Italy.
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