Investopedia: Constellation Brands Looks To Keep The Recovery Flowing

Change within a company can be difficult, not to mention risky, but Constellation Brands (NYSE:STZ) hasn't shied away from reconfiguration. Once known only for its wine business, the company has an attractive niche spirits business and has ponied up significant capital to take control of its Crown Imports joint venture. While these shares are up strongly over the past year and alcohol-related stocks are doing well now, investors may want to pause to consider the valuation before bidding these shares up further.

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Investopedia: Rumors About A Diageo-Beam Tie-Up Are Interesting, But Not Too Likely

December is the season for rumors in the financial markets, as there's relatively little actual news for reporters and columnists to discuss. With that in mind, a weekend piece in Britain's Sunday Telegraph regarding a potential merger between Diageo (NYSE:DEO) and Beam (Nasdaq:BEAM) should be taken with more than a few grains of salt.

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Investopedia: Brown-Forman May Struggle To Keep This Premium

When times get tough, investors will hit the bottle. Although sales of beer and spirits aren't quite as invulnerable to economic conditions as some investors like to believe, they are a lower-beta product category. All of that said, and allowing for the good success seen lately in promoting new internally-developed products and boosting margins, it's hard to see how Brown-Forman (NYSE:BF.B) keeps its elevated premium for the long haul.

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Investopedia: Brown-Forman Another Example Of Overpaying For Safety

As has been the case with other names in the spirits business like Diageo (NYSE:DEO) and Beam (NYSE:BEAM), investors seem comfortable overpaying to own the stock of Brown-Forman (NYSE:BF.B). Certainly there is a growth angle to this story, as the company looks to extend its world-leading share in bourbon to new markets like China. That said, even high single-digit free cash flow growth isn't enough to push the fair value estimate to an attractive level.

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 http://stocks.investopedia.com/stock-analysis/2012/Brown-Forman-Another-Example-Of-Overpaying-For-Safety-BF-B-BEAM-DEO-BUD0608.aspx

Investopedia: Premium Spirits Drive A Premium Valuation for Beam

With bad news seemingly rolling in every day about the economic conditions in one part of the world or another, I can understand the flight to quality/consistency that has pushed up some well-known names. But while I understand the appeal of a stock like Beam (NYSE:BEAM), I still don't want to overpay for an asset that is unlikely to bail me out with exceptional growth. So while Beam is certainly a global spirits company worth watching, it will have to pull back a fair bit before the valuation looks truly appealing.

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Investopedia: Central European Distribution Still A Mess

Investors don't have to search especially hard for evidence that liquor and spirits businesses can be ludicrously profitable if run well. Unfortunately, Central European Distribution (Nasdaq:CEDC) shows quite clearly what happens when a business is over leveraged and not run especially well. While there is definitely value in this business, it is very much an open question as to how much (if any) of this value will reach shareholders.

Another Messy Quarter
For a company that may have legitimate "going concern" issues, CEDC's fourth quarter wasn't really all that bad. That said, it was fairly confusing.

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Investopedia: Yet Another Disappointment From Central European Distribution

At some point, a company's travails can no longer be just about a difficult market. Sooner or later, management has to step up, acknowledge mistakes and craft a plan for better results. Although Polish and Russian vodka producer Central European Distribution (Nasdaq:CEDC) still has a lot of inherent value in the business, investors cannot afford to have much confidence in management anymore. Sooner or later, the question has to be asked whether the markets are truly so challenging or whether management simply isn't up to the challenges.

Another Big Miss  
CEDC reported that revenue grew 45% third quarter in 2011 compare to same period in 2010, with 25% value growth in Russia and 7% value growth in Poland. Although volumes were strong in Poland (up 18% compared to third quarther 2010), growth in Russia was just 3% and well below management expectations.

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Investopedia: Constellation Grows By Shrinking

It's not the greatest testament to a business division, when the parent company jettisons it and posts higher profits. Such is the case for Constellation Brands (NYSE:STZ), a company that spent and borrowed too much to expand and is now trying to find a business model that offers better growth and margins for the long haul.

A Fiscal Q2 Better Than Expected 

Constellation's fiscal second quarter results were not great, but they were better than most analysts expected. As-reported revenue plunged 20% (or 21% in constant currency), while organic revenue was basically flat, the difference coming from the divestiture of the Australian and European wine businesses.

Volume was quite mixed. Total North American shipment volume was down almost 2%, as reported, and even worse on an organic basis, which was down almost 4%. Depletion volume, which measures the flow of product from distributors to retailers, was negative in an industry that's showing some modest growth. That said, beer and spirits businesses seem to be doing a fair bit better.

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Investopedia: Constellation Waits For The Stars To Be Right

Can the largest publicly-traded wine business regain the shareholder love it once enjoyed? Constellation Brands (NYSE:STZ) rode a heck of a wave as wine consumption took off in the U.S. about 10 years ago and the company acted as a major consolidator. Since then, though, the company has found that its empire hasn't quite validated the debt that underwrote its construction and the stock has not been the winner that its owners may have expected. 


A Sluggish Start to the Fiscal Year
Constellation Brands did not get its new fiscal year off to a roaring start. While reported revenue dropped more than 19%, organic revenue grew about 2%. Shipments fell more than 3%, depletions were down more than 2% and results in wine were generally disappointing. While the company's beer distribution business is doing pretty well, the company is losing some share in wine to the likes of Gallo, Wine Group and Trinchero.

Profitability was a better story, though. Gross margin jumped about five full points and operating income grew 12% from last year's level. Some of this improvement was due to less promotional spending - a mixed blessing that boosts margins but takes a toll on sales growth and market share. 



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Investopedia: Central European Distribution - From Russia, With Disappointment

Although the Russian character is suffused with a grim fatalism, there is also a strong history of resilience in the face of adversity and an unwillingness to back away from a challenge. Though Central European Distribution (Nasdaq:CEDC) is technically an American company, this leading producer and seller of vodka in Russia and Poland may do well to take a page from its customers. While CEDC is a liquor company with real prospects for the future, it has just as many real problems in the present. 


A Bad End To A Hard Year
For much of 2010, Central European Distribution has better resembled the Gang That Couldn't Shoot Straight. Missed, and then lowered, guidance had been an issue throughout 2010 and there was always something else to blame - a cold winter, a hot summer, a tragic plane crash that killed Poland's president, other important government figures, and 96 people in total.

Maybe it should not have been surprising, then, that CEDC would miss again in the fourth quarter. Revenue dropped 11% for the final quarter and certainly missed estimates. This time the company pointed to production problems during the peak selling season as the culprit, but the company did note that volumes increased in Russia by 8% and the company stabilized (and then reversed) market share losses in Poland.


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Breakup Key For Fortune Brands?

Conglomerates are funny things. It seems that if a company can get large enough, say on the order of Danaher (NYSE:DHR) or United Technologies (NYSE:UTX), investors often make their peace with the corporate structure and go about their business. Smaller companies get quite a bit more scrutiny when they are in multiple business lines, though, and the peculiar combination of booze, golf clubs, faucets and front doors always seemed to fuel speculation that Fortune Brands (NYSE:FO) would eventually break itself up into its constituent parts. Years of speculation have finally come true, as the company announced Wednesday morning that it would launch just such a plan.

From One to Three
At this point, it seems as though the board of directors at Fortune Brands has only really decided on the big-picture aspects of the plan. Fortune Brands itself will continue as a publicly-traded company focused on the spirits business. The home and security business (with its leading businesses in faucets, cabinets and doors) will be spun-off to shareholders and become a separate publicly-traded company. The fate of the golf business is less certain - the company will either spin this business off as another publicly-traded entity or sell it outright.

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Constellation Brands Not Going Nova Yet

People may drink through good times and bad, but that is no guarantee that they will remain loyal to the same brands. Not only have overall economic conditions hurt Constellation Brands (NYSE:STZ) since the beginning of the recession, but ongoing turbulence in consumer preference has made for unstable results.

The Quarter that Was
All things considered, this leading wine maker actually had a pretty solid fiscal second quarter. Reported sales dropped 2%, but this was due in part to the sale of the company's U.K. cider business. On an organic basis, sales were actually up 2%. Going a little further, wine sales grew 4% in the U.S., Europe and Australia, while spirit sales were down 15%. 


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