Earnings Preview: Constellation Brands, Inc. (STZ)

The acquisition should add $7 billion in sales currently, with around 15% growth in 2013 and 2014. Anheuser-Busch InBev can generate this growth as it is a big brand name in the emerging markets, where beer sales are also on the rise compared to the U.S. market. However, the synergies of this acquisition will not continue perpetually, so the top line growth should reduce to 2%-3% in 2015-2017 unless the company goes shopping again.

Apart from acquisitions adding tremendous upside potential to the stock prices of Anheuser-Busch InBev, it also has a stable dividend of 2.2% with enough free cash flow to support it in the future. Moving forward, as the company repays its debt used to finance Modelo’s acquisition and its balance sheet gets better, it would become a more attractive investment.

Final words

Constellation Brands, Inc. (NYSE:STZ) is moving strong and is surprising its investors every quarter with something extra. In this quarter analyst’s estimates should be met easily. However, in case analysts’ estimates are missed and it triggers share price depreciation, it should be seen as a buying opportunity. The acquisition of Modelo and company’s strategic operations should only help in delivering better performance in the future.

The article Earnings Preview: Constellation originally appeared on Fool.com and is written by tarun bachhawat.

tarun bachhawat has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. tarun is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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