Constellation Brands Inc. (STZ), nfl jerseys the largest wine company in the world, posted its first quarter 2012 results. Street analysts have had nearly a week to ponder the news. In the subsequent paragraphs, we cover the recent earnings announcement, Moncler down Jackets Men hat medium grey analysts estimate revisions as well as the Zacks Rank and long term recommendation on the stock. See the full earnings call transcriptOn June 30, 2011, delivered an adjusted EPS of 39 cents in its first quarter ended May 31, 2011, outperforming the Zacks Consensus Estimate of 37 Moncler Vest down Men black no hat zip cents and improving by a penny from the prior year quarters earnings of 38 cents. 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 35 cents versus 22 cents in the year ago quarter. Sales in the quarter plummeted 19.3% to $635.3 million Moncler Women down jacket big neck Grey from the year ago quarter. cider business. However, sales for the quarter surpassed the Zacks Consensus Estimate of $613.0 million. Management s Guidance for 2012 The company expects its fiscal 2012 EPS to be in the band of $1.90 to $2.00. The guidance factors in an interest expense expectation range from approximately $180 to $190 million, an approximate tax rate of 29% and weighted average diluted shares outstanding of approximately 216 million. expects to generate $685 million to $745 million of cash from operations in fiscal 2012 and deploy $85 million to $95 million toward capital expenditure. Accordingly, the company anticipates free cash flow in the range of $600 to $650 million in fiscal 2012. (Read our full coverage on this earnings report: Constellation Shines in 1Q) Agreement of Analysts Estimate revision trends for the upcoming second quarter 2012 portrayed positive moncler sweatshirt sentiments among most of the analysts. Over the last 7 days, 7 out of 8 analysts revisited their estimates and all have adjusted it in upward direction. While for third quarter 2012, 7 analysts revisited their estimates and all have downgraded their estimates, reflecting a negative sentiment among the analysts. Moreover, for full fiscals 2012 and 2013, most of the analysts have negative sentiments. For fiscal 2012, 5 out of 8 analysts revisited their estimates, of which 3 downgraded and 2 upgraded their estimates. Similarly, for fiscal 2013, 2 out of 3 analysts, who revisited their estimates have lowered it and the remaining 1 has adjusted it in upward direction. Magnitude of Estimate Revisions The magnitude of estimate revisions for depicts moncler jackets sale men an optimistic outlook for the upcoming second quarter 2012 and pessimistic outlook for the third quarter of 2012 and for full fiscals 2012 and 2013. The magnitude of estimate revision for the second quarter of 2012 has been increased by 6 cents to 65 cents per share. Over the last 7 days, estimated earnings for third quarter of fiscal 2012 have been decreased yellow moncler vest by 9 cents to 57 cents per share. The company stated that its operating results were under three reporting segments: Constellation Wines (includes branded wines, spirits and other), Crown imports (includes imported beer) and Corporate operations. Currently, holds a Zacks 3 Fashion Moncler Clairy Dowe sleeveless Women Vest Red Rank, implying a short term Hold rating moncler mate on the stock. However, in the long term, we have a Neutral recommendation on the stock

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Constellation s Wine Is No Crown On January 9, mlb jerseys (STZ) reported its Q3 earnings. Anyone who has followed STZ knows that it was the best S 500 consumer staples stock in 2012, as it increased over 70% during the year. That is quite an accomplishment for this sector, especially one that primarily sells wine. Constellation is clearly a hot item in this sector then. The questions that remains are: 1) Does the +70% run up already moncler shirts men factor in the new Crown import deal? 2) Is STZ now more of a beer company than a wine company? Rather than describe the basics of the business, an investor should know that STZ is driven by a few things. STZ is engaged in the importation of wine, spirits, and beer. Its brands include Robert Mondavi, Ruffino, Kim Crawford, Svedka vodka, Black Velvet whiskey, and the importation of Grupo Modelo s brands (Corona, Modelo Especial, Pacifico, Victoria, and many others). It used to own St. Pauli Girl and still imports Tsingtao. Prior to the Anheuser Busch InBev (BUD) acquisition of Grupo Modelo on June 29th, 2012, STZ was the importer for Grupo Modelo via the Crown Imports joint venture. BUD owned a large stake in Grupo and due to the success of the Modelo brands against its own, BUD bought out Grupo. This came with a $2B payment to STZ for the cancellation and its share of assets in Crown Imports. However, STZ managed to obtain the full importation rights into the US from BUD. Wine is the main product by revenue for Constellation, but its other segments are growing faster. STZ s wine mainly focuses on the premium priced wine over the value prices. In 2011, craft beer was up 16.4% in volume against a 2% drop in volume for the entire industry: The beer market is still controlled by BUD and will be for the future as it controls the market and is in acquisition mode to control more. Grupo Modelo is a huge part of the global market and will help BUD grow (Source: Bloomberg):Spirits is centered on one company: Diageo (DEO). DEO has the market share, strong brands, new acquisition of United Spirits in India, and a solid distribution system. No matter how much STZ wants Svedka and Black Velvet to grow, it will be no DEO (Source: Bloomberg):Wine is what STZ is known for and centers on. The biggest players in this space are private companies in E Gallo and The Wine Group Inc. STZ has been losing market share since 2008 in terms of volume as it has been divesting lower margin brands in favor of higher margins. This has gone against the trend of value over premium. The wine industry is comprised of many small players that take the majority share as a whole (Source: Bloomberg):Input costs for all alcoholic beverage players have been volatile in recent years, Moncler Womens Vest tarn Rabbit hats Zip white especially for beer producers with barley. Wheat has struggled with droughts in various areas but is on the decline in recent months. Grapes are a big input for STZ. The spot price for grapes increased 18% Y/Y at the end of 2012 due to the volatile weather, including droughts and freezes in key areas (Source: Bloomberg).(click to enlarge)STZ s run in 2012 was astronomical for a consumer staples company. STZ s share price skyrocketed from $21.76 to $28.81 by July 2nd. This is roughly a 32% gain, as the market realized that STZ would be given a $2B immediate payout due to the dissolution of Crown Imports. The chart below shows the price movement during this time (Source: Capital IQ): The following is the valuation and operating metrics as of January 16, 2013 (Source: Capital IQ): There really is no public company that is comparable to STZ moncler outlet sale as the majority of its revenue comes from wine. This will change when the importation of Modelo products is included in revenue in FY2014. STZ has higher input costs than peers and does not have the margins that peers have, despite it being a premium focused company. By becoming more beer focused, its margins will decline, as evidenced by TAP who has similar GPM despite being a beer only company but a lower EBITDA margin. STZ s revenue growth has been lacking as wine hasn t really been growing. On top of this, STZ has the 2nd highest leveraged balance sheet as its debt/capital is 59.35% of capital! Some of this is from an increase in debt issued due to the new deal with BUD and two acquisitions in 2012. It is a highly leveraged company that is not growing as fast as other alcoholic beverage moncler clearance companies. The import of Crown into the US will help growth. BUD will still control the supply of Crown and could squeeze STZ with lower margins for the rights to distribute Modelo s products. In FY14, STZ will no longer be focused on just wine but will in essence double its revenue base with the added rights. This is why investors looking at analysts expectations for STZ will notice that revenue will double. From a balance sheet perspective, STZ is very unhealthy. As pointed out by Bloomberg, STZ has the highest goodwill to assets ratio of 34.1%. The industry only averages 13.9%. (Source: Bloomberg) Eventually this goodwill could be impaired, leading to a sharp overnight decline in the stock price. STZ did not even want to acquire the remaining part of Ruffino but were in a way forced into it. The high amount of goodwill is a cause for concern. On top of Moncler Men down Jackets hat with zip black this, STZ has had restructuring costs every year since FY2003. Part of this is due to management acquiring various brands or companies and then divesting them a few years later because it was not working how they thought it would. Another cause of concern is the average cash conversion cycle. It takes STZ almost a full year for its cycle, with some of this due to the fact that wine inventory is stored longer (Source: Capital IQ): Between the high amount of debt and the large amount of goodwill, STZ should not be a prime choice for investors. However, there is further doubt on a going concern basis for Constellation. A company cannot sustain having moncler hats for men a higher amount of depreciation and amortization than capex. STZ has not been investing in itself enough and this is a going concern (amounts in $mil Source: Capital IQ): Without Crown Imports JV, STZ would have been in trouble in recent years. Crown has been the reason STZ has done so well, including in 2012. The following chart illustrates this point (Source: Capital IQ): As shown, in 2008 and 2009, STZ had negative net income. However, the income from its equity investments was positive by about $200M. About 70% to 80% of this amount is attributable to Crown Imports alone based on extrapolated data. In 2010, equity investments brought in more than total net income. Without this joint venture, STZ may not have been able to pay off the interest on its debt in those years. Crown has been more than 50% of net income, thus showing the dependence Moncler Men short Sleeves T-shirt grey of STZ on Crown: Clearly, STZ is dependent on the importation of Modelo. If either the acquisition of Grupo Modelo by BUD or the deal between BUD and STZ were to falter, STZ could be in trouble and experience a serious drop of net income. This is a huge risk that the market is not taking into account, especially as regulators may demand BUD divest more brands to acquire Grupo Modelo. This could turn into what UPS and TNT Express just experienced. Either way, STZ is a loser if the deal does not happen. Constellation also has a dual share class. This is a debatable subject as dual share classes are not always bad as long as value is being created for the shareholder. However, A shares only have 1 vote and B shares have 10 votes per share (Source: Proxy Statement). Fashion moncler Slippers Cow Leather The majority of B shares are controlled by the executives, namely Richard and Robert Sands (Source: Bloomberg). This leaves the risk with the A shares over the B shares. In other words, STZ could be a private company acting like a public company for financing purpose only. The question is whether or not the company is creating value for its shareholders. If one looks at the EVA of the company, management has been destroying shareholder value over the last decade if an 11% WACC is assumed:

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