STZ - Embedded Expectations Analysis - 2019 07 26
Constellation Brands, Inc. (STZ:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Earnings, with a 23.3x Uniform P/E. At these levels, the market has bullish expectations for the firm. Additionally, management is confident about their Canopy Growth business, pricing and productivity, and SG&A management.Specifically, management is confident that they expect their full year operating margin to approximate 39% for FY 2020, and that cost inflation headwinds and growth investments are expected to be mostly offset from product pricing and productivity initiatives. Furthermore, they are confident the lower marketing and SG&A benefits were due in part to a shift in timing of spend into Q2 as they have a significant ramp in spend to support the power brands during the summer selling season. Additionally, they are confident their Crafters Union brand was part of their tie-in with the NFL. Moreover, they are confident when saying that the total pretax net gain recognized since their initial Canopy investment in November 2017 is $1.6bn, and that they know the cannabis business is volatile in Canada, but they think it is mostly on track with all of their expectations.
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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