Investopedia: Pricey Constellation Brands Has A Lot To Live Up To

Complaining about the high valuation of beverage stocks like Coca-Cola (NYSE:KO), Diageo (NYSE:DEO), and Anheuser-Busch InBev (NYSE:BUD) is largely a futile exercise. Investors prize the strong cash flows and returns on capital that these businesses can achieve, and many analysts and investors are completely sold on the idea that ongoing income growth in the emerging market will lead to both higher sales and higher scale-driven margins down the line.

I can accept all of that to a certain point, and I certainly can't complain if the market wants to award a rich valuation to the shares of SABMiller (OTCBB:SBMRY) that I own. In the case of Constellation Brands (NYSE:STZ), I can see multiple avenues for better long-term performance, particularly if the U.S. Department of Justice ultimately gives the “all clear” to the restructured Grupo Modelo transaction. That said, investors should ignore the strong performance expectations that are already built into the valuation and the risk that the shares could underperform the market as a result.

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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: 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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