UPDATE: Goldman Sachs Upgrades Constellation Brands

According to a research report published earlier today, Goldman Sachs has upgraded Constellation Brands

from Neutral to Buy, and has established a $29 PT. In the report, Goldman Sachs said there are three key tenets to the upgrade, including, “(1) Improving wine fundamentals – Recent retail sales data shows STZ gaining market share in the US wine industry, driven by innovation and a more effective promotional strategy. We also expect 4QFY12 EPS (April 5) to show acceleration in STZ's depletion (sales to retailers) trends. (2) Compelling capital allocation potential – STZ has de-levered its balance sheet and generates $500mm+ in free cash flow. We expect at least $300mm of share buybacks per year in FY13 and beyond. (3) Undemanding valuation – STZ currently trades at 11X P/E and 8X EV/EBITDA. Our $29 12-month price target is based on a sum-of-the-parts analysis where we value STZ's wine/spirits business at 13.5x P/E and 9x EV/EBITDA, and the Crown Imports beer business at 14X P/E, but only ascribe a 33% likelihood of STZ retaining the JV beyond 2016.” Constellation Brands closed yesterday at $23.95.