SunTrust Says Buy The Recent Dip In Constellation Brands Shares

SunTrust said the recent dip in the shares of Constellation Brands, Inc.

offers a solid buying opportunity. "When considering the weather data for both Cinco de Mayo and Memorial Day, we believe the pullback in the stock represents a solid buying opportunity for one of the strongest growth stories in CPG. We reiterate our Buy rating," analyst William Chappell wrote in a note. Earlier this week, shares of STZ fell 4 percent on investor concerns about decelerating sales for its beer portfolio based on the Nielsen data for the four-week period ending May 21. The data says the total volume was only up 6.5 percent, and volumes for Corona, which makes up close to half of the overall portfolio, were actually down mid-single-digits for the period. However, Chappell said the volume deceleration was greater than expected. "We note that virtually every food and beverage company saw its US sales trends deteriorate during this 4-week period which has been attributed to unseasonably cool and wet weather across much of the country," the analyst said. Further, SunTrust's analyzed Cinco de Mayo period, in which Constellation kicks off its major promotional campaigns for its Mexican beer portfolio, and also included in the Nielsen's recent 4-week tracked period. The analysis showed that this period was meaningfully colder and wetter than a year ago, particularly in the eastern half of the US, implying the recent sales data was in fact weather impacted and is not indicative of a decline in popularity for the company's beer business. The analyst noted that the 2016 Memorial Day weekend looks good for the company as Nielsen says the Memorial Day weekend is the second largest timeframe for beer sales in the US. "Looking at the weather trends, the data looks favorable across every region including the Southwest (note that Texas experienced excessive rainfall in May of 2015 as well)," Chappell added. At the time of writing, shares of Constellation Brands were down 0.21 percent to $153.49. Chappell has a price target of $180 on the stock.