Constellation Brands, Inc. (STZ), Anheuser-Busch InBev NV (ADR) (BUD): Deal or No Deal, This Spirits Maker is a Winner

Constellation Brands, Inc. (NYSE:STZ) also continues to pursue acquisitions in the craft beer segment, an area of the industry that has grown at double-digit rates for the past decade. The industry is led by trailblazer Boston Beer Co Inc (NYSE:SAM), which was founded by Jim Koch in his kitchen in 1984. The company has grown sales by 45% over the past four fiscal years, due to both the increased popularity of its brews and the introduction of new products in the malt and cider categories.

In FY 2012, Boston Beer reported strong financial results, with increases in net sales and adjusted operating income of 13.1% and 14.2%, respectively, versus the prior year. The company achieved 10% growth in its core shipments to 2.7 million barrels, with solid performance in its Twisted Tea malt and Angry Orchard cider beverages. Despite higher commodity costs, Boston Beer maintained a solid operating margin due to consumers’ willingness to pay higher prices for better quality beers.

Looking forward, Boston Beer is forecasting another solid year in 2013, with stable pricing and another double-digit increase in volume growth. The company has reduced its operating risks by continuing to add to a product portfolio that includes 50 styles of craft beer. In addition, Boston Beer is investing in future craft brewers through its Alchemy & Science incubator, which should provide a pipeline of new products that will lead to future growth opportunities.

Constellation Brands, Inc. (NYSE:STZ) has markedly improved its financial profile and operating position with its recent string of acquisitions and divestitures.  While any further control of the global beer market by InBev would be bad for consumers, due to its dominance in key markets, the federal government will likely approve the revised Crown Imports deal.  The new deal also gives Constellation ownership of InBev’s Piedras Negras brewery and direct control of the distribution process.  Regardless of the outcome, though, Constellation Brands, Inc. (NYSE:STZ) will increasingly be looking to expand its presence in the premium-priced beer segment, which includes both craft and import beers. Its 19 P/E multiple may give investors some pause, but the stock needs to be on investors’ buy list in any market pullback.

The article Deal or No Deal, This Spirits Maker is a Winner originally appeared on Fool.com and is written by Robert Hanley.

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