When times are tough, people drink alcohol. But how should you satisfy your thirst for investment profit? A few companies include Constellation Brands (NYSE:STZ), Molson Coors (NYSE:TAP) or Brown-Forman (NYSE:BF.B).
On Thursday morning, wine and spirits maker Constellation — which sells brands such as Robert Mondavi, Svedka and Corona — is poised to report earnings of 65 cents per share, up 51% from 2010. Constellation has spent the past five years cutting costs and selling brands that don’t fit the “premium-category” wines priced from $5 to $20 a bottle, where it wants to cement its lead. During that time it has reduced its debt from $5.3 billion to $3 billion and cut 5,100 employees to a slimmer payroll of 4,300.
Molson Coors does not look to be in such market-beatingly good shape. Its second-quarter profit of $1.23, reported Aug. 2, fell 4.65% below analysts’ expectations. And in the past month, analysts cut their Molson Coors EPS projections for 2011 — by three cents to $3.55 per share — and by seven cents to $3.74 per share for 2012.
Brown-Forman, maker of premium brands such as Jack Daniel’s, Finlandia, Southern Comfort and Canadian Mist, is doing much better. Brown-Forman’s adjusted EPS grew 7% to 81 cents per share in the first quarter of fiscal 2012 on 12.8% revenue growth thanks to its strong performance in the international market.
So which beverage companies should you buy? Avoid Brown-Forman and Molson Coors and consider investing in Constellation. Here’s why:
Constellation is the winner in this bunch. Its refocusing is producing profit growth that’s likely to exceed its current low valuation. Molson Coors and Brown-Forman are solid performers, but investors love them too much.
Peter Cohan has no financial interest in the securities mentioned.