15 Best Large-Cap Value Stocks to Buy as the Recession Hits

12. Constellation Brands, Inc. (NYSE:STZ)

Number of Hedge Fund Holders: 51

Forward P/E as of April 15: ~14.04x

Constellation Brands, Inc. (NYSE:STZ) is engaged in producing, importing, marketing, and selling beer, wine, and spirits. Andrew Strelzik from BMO Capital maintained a “Buy” rating on the company’s stock with a price objective of $215.00. The rating is backed by factors demonstrating its strategic positioning and future growth potential. Constellation Brands, Inc. (NYSE:STZ)’s strategic divestiture of mainstream wine brands is regarded as a positive move, which concentrates its portfolio in the premium segment, enhancing growth over time, says the analyst.

On April 9, Constellation Brands, Inc. (NYSE:STZ) announced that it had signed an agreement with The Wine Group to divest primarily mainstream wine brands and related vineyards and facilities from the wine portfolio. Furthermore, the analyst believes that a slower growth in Beer sales is because of broader socioeconomic factors rather than a decline in brand strength. This suggests a potential for growth acceleration as and when the broader consumer environment stabilizes. Moving forward, premium positioning and robust brand equity can enable it to sustain its outperformance. With consumers moving towards premium offerings, Constellation Brands, Inc. (NYSE:STZ)’s portfolio remains well-placed to capture market share and mitigate the category weakness.

Coho Partners, an investment management company, published its Q2 2024 investor letter. Here is what the fund said:

“We also eliminated Conagra (CAG) in favor of a better risk/return for Constellation Brands, Inc. (NYSE:STZ). We are encouraged by the Constellation Board’s decision to eliminate the dual voting share class and reprioritize capital allocation away from acquisitions and towards returns to shareholders. With capital spending expected to decline and leverage near the company’s target, more cash flow should be available for shareholders. STZ is now focused on the higher growth and the higher margin premium beer category, which they dominate with Corona Extra, Modelo Especial and Pacifico. Additionally, the Wine and Spirits business, which has been disappointing is no longer a meaningful part of STZ’s business as it now accounts for less than 10% of overall earnings. We expect STZ to deliver low double-digit growth in both earnings and dividends for many years to come, which is consistent with the Board’s recent approval of a 13.5% dividend hike.”