STZ - Embedded Expectations Analysis - 2021 02 18
Constellation Brands, Inc. (STZ:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings, with a 28.7x Uniform P/E. Even at these levels, the market has bearish expectations for the firm, but given management's confidence about their capital allocation strategy, Wine & Spirits sales growth, and the Obregon facility completion, market expectations are too bearish, suggesting equity outperformance is warrantedSpecifically, management is confident they remain consistent with their capital allocation strategy and are committed to returning $5 billion to shareholders through 2023. In addition, they are confident the Wine & Spirits business is now better positioned for net sales growth following the completion of their divestitures and that 90% of DTC wine sales are priced $20 and up. Furthermore, management is confident the Obregon facility will be completed in early FY2022 and they are successfully executing their digital commerce initiatives
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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