Where Constellation Brands’ Valuation Stands after Its Q3 Results

Constellation Brands' Guidance Cut Overshadowed Its Q3 Results (Continued from Prior Part) ## STZ’s valuation Constellation Brands (STZ) was trading at 12-month forward PE multiple of 15.4x as of the end of the day on January 9. Constellation Brands’ forward valuation multiple fell 13.1% on January 9 as the company lowered its guidance for fiscal 2019, which ends on February 28, 2019. Higher interest expenses associated with the company’s financing of its stake in Canopy Growth (CGC) and weakness in the performance of its wine and spirits business are expected to adversely affect its fiscal 2019 earnings. As of January 9, Anheuser-Busch InBev (BUD), Molson Coors Brewing (TAP), and Brown-Forman (BF.B) are trading at 12-month forward PE multiples of 17.3x, 12.4x, and 27.1x, respectively. Constellation Brands is trying to boost its performance by focusing on premium brands in the beer and wine and spirits businesses. The company is exploring strategic alternatives to address the weakness in the $11 and below price point in the wine and spirits business. Constellation Brands is also focusing on innovation to drive its top line growth. Its Corona Premier, a low-calorie beer, has achieved tremendous success since its introduction. In the wine and spirits business, the company’s latest product introductions include Meiomi Rosé and SVEDKA Blue Raspberry. Constellation Brands has over a 36% stake in leading cannabis company Canopy Growth and has the option of increasing its stake to over 50%. Constellation’s significant investment in Canopy Growth gives it the opportunity to capitalize on the growth prospects in the global medicinal and recreational cannabis market. ## Analysts’ expectations Analysts expect Constellation Brands’ sales to rise 6.7% to $8.1 billion and its adjusted EPS to rise 6.8% to $9.31 in fiscal 2019. In fiscal 2020, the company’s sales growth and adjusted EPS growth are expected to be 6.5% and 5.9%, respectively. Its premium Mexican beer brands are likely to be the key drivers of its future growth. Browse this series on Market Realist: * Part 1 - Constellation Brands’ Guidance Cut Overshadowed Its Q3 Results * Part 2 - How Constellation Brands’ Q3 Earnings Shook Out * Part 3 - Assessing Constellation Brands’ Q3 Sales Growth