5. Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 36
While Cramer acknowledged that sentiment around alcohol and companies like Constellation Brands, Inc. (NYSE:STZ) is a little negative due to health concerns and more, he mentioned that the stock is worth investing in.
“It’s a bedraggled liquor stock we own for my Charitable Trust that’s been up and down and up and now mostly down. It’s a bit of a jobe stock. Right now, alcohol is under siege by everyone from the Surgeon General this morning for link to cancer to the GLP-1 drugs, which blunt the craving to the, in the case of Constellation, potential tariffs on its Mexican beers, Modelo and Corona, plus an endangered population of drinkers of some significance, the Hispanic immigration cohort that could be hassled or deported by the authorities under Trump.”
Cramer acknowledged the challenges for the company, however, he believes the company is still a solid investment due to its strong cash flow and growth potential. Cramer also speculated that the president-elect might exempt imported beer from tariffs, which could help Constellation. Having recently bought shares for the Charitable Trust, he explained that sometimes enduring tough times is necessary to make a profit.
Cramer said that he expects the company to announce the completion of its Mexican brewery and the end of construction costs, which could lead to a bigger stock buyback.
“On the conference call, we wanna hear that this gigantic brewery that they’re building in Mexico is almost ready and the costs for building it are behind them. That could lead to a voracious buyback much bigger than [the] one they currently have. I know it’s a dicey one and I don’t feel good about it, but what can I tell you? Sometimes you just don’t feel good before you make money.”
Constellation (NYSE:STZ) is a leading producer, importer, marketer, and seller of beer, wine, and spirits, offering beer primarily under a variety of brands. At the end of fiscal 2024, the company’s existing facilities in Mexico had a production capacity of approximately 48 million hectoliters. It plans to allocate approximately $3 billion in capital expenditures from fiscal 2025 through fiscal 2028 to continue expanding its operations.
The company raised the lower end of its full-year comparable EPS outlook, which now stands at a range of $13.60 to $13.80. It expects enterprise net sales to grow between 4% and 6% for fiscal 2025, with enterprise comparable operating income anticipated to increase by 8% to 9%. However, in its wine and spirits business, the company forecasts declines in both net sales and operating income for the full fiscal year.
Constellation (NYSE:STZ) expects a 4% to 6% drop in net sales and a 16% to 18% decrease in operating income due to ongoing operating deleverage and top-line challenges. For fiscal 2025, the company also expects free cash flow to range between $1.4 billion and $1.5 billion, marking the high point of capital expenditures in its beer business medium-term outlook.
