Earnings Preview: Constellation - Analyst Blog

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Constellation Brands Inc. (STZ) is scheduled to release its first-quarter 2012 results on Thursday, June 30, 2011. The Zacks Consensus Estimate is pegged at 38 cents a share for the first quarter of fiscal 2012, flat year over year.

Fourth Quarter Performance      

Constellation Brands delivered an adjusted EPS of 35 cents in its fourth quarter ended February 28, 2011, outperforming the Zacks Consensus Estimate of 26 cents and improving 30% from 27 cents in the prior-year quarter.

Both the reported and prior-year quarter's EPS excluded special items like inventory step-up costs, net gains/losses from its strategic business realignment initiatives and other items. Netting these items, the company reported EPS of $1.32 versus a loss per share of 23 cents in the year-ago quarter.

Sales in the quarter inched up 0.9% to $715.3 million from the year-ago quarter. A 10% organic constant currency net sales increase was offset by divestitures of the Australian and U.K. wine business and U.K. cider business. However, sales for the quarter fell short of the Zacks Consensus Estimate of $725 million.

Agreement of Analysts

Over the last 30 days, 3 analysts out of 8 moved their estimates downward with no movement in the opposite direction, for the first quarter of fiscal 2012. For fiscal 2012, only 1 out of 8 moved the estimate in the upward direction with no downward revision over the last 30 days.

In the last 7 days, none of the analysts have moved their estimate in the upward direction, with 1 downward movement, for the first quarter of fiscal 2012. For fiscal 2012, there has been no movement at all in estimate revision in the last 7 days.

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Magnitude of Estimate Revisions

With no net effect from estimate revision by analysts in the last 7 days, for Constellation Brands, for the upcoming quarter and fiscal 2011, the consensus estimates have remained stagnant at 38 cents a share and $1.98 per share, respectively. In the last 30 days, the estimate for first quarter of fiscal 2012 slipped by 1 cent while for fiscal 2012 the consensus nudged up by 1 cent.

Earnings Surprise

Considering earnings surprises, the stock has been steady over the last four quarters, with positive surprises ranging between a low of 6.1% and a high of 34.6%. The average remained positive at 13.9%.

Our Recommendation

Currently, Constellation Brands holds a Zacks #2 Rank, implying a short-term 'Buy' rating on the stock. However, in the long term, we have a 'Neutral' recommendation on the stock.

Constellation Brands is the largest wine company in the world with a strong portfolio of premium wine brands complemented by spirits, imported beer and other select beverage alcohol products. The company has operations in five core markets of the U.S., Canada, the U.K., Australia and New Zealand. The company states its operating results under three reporting segments: Constellation Wines (includes branded wines, spirits and other), Crown imports (includes imported beer) and Corporate operations.

Constellation benefited from the U.S. distributor consolidation initiatives and renewed focus on building and promoting brands. Management stated that these efforts enabled the company's top 15 U.S. wine brands to expand at a rate faster than the market and account for a significant portion of U.S. wine profitability. 

Constellation Brands competes with Foster's Group Ltd. (FBRWY) and privately held E. & J. Gallo Winery and Jackson Family Wines.



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