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https://www.barrons.com/articles/stock-market-movers-e5dab615
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https://www.barrons.com/articles/constellation-stock-price-earnings-bud-light-a7957686
Constellation Brands‘ earnings beat Wall Street’s expectations as the company reported strong beer sales for the latest quarter on Friday. The stock fell anyway.
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Constellation Brands, Inc. engages in the production, marketing, and distribution of beer, wine, and spirits. It operates through the following segments: Beer, Wine and Spirits, Corporate Operations and Other, and Canopy. The Beer segment includes imported and craft beer brands. The Wine and Spirits segment sells wine brands across all categories-table wine, sparkling wine, and dessert wine-and across all price points. The Corporate Operations and Other segment refers to the costs of executive management, corporate development, corporate finance, human resources, internal audit, investor relations, legal, public relations, and information technology. The Canopy segment consists of canopy equity method Investments. The company was founded by Marvin Sands in 1945 and is headquartered in Victor, NY.
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Rick Diamond/Getty Images
Modelo Especial has quietly overtaken
Anheuser-Busch InBev
Bud Light as the nation’s top-selling beer, punctuating the impact of a boycott that followed the brand’s controversial promotion by a transgender activist.
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Bud Light’s recent troubles should worsen in the summer, to the benefit of its competition’s brands, enough to turn Roth MKM analyst Bill Kirk bullish on the stocks of Constellation Brands Inc. and Boston Beer Co. Inc.
Kirk raised on Tuesday his rating on Modelo, Corona, Pacifico beer parent Constellation Brands to buy, after being at neutral since January 2021, while boosting his stock price target to $270 from $216.
Kirk said a lot of the market share Anheuser-Busch InBev SA’s Bud Light lost, amid backlash from the beer brand’s partnership with trans influencer Dylan Mulvaney, went to other premium light products, but he expects that to shift to Constellation’s favor.
“As the weather warms, we expect the share gains for Modelo Especial and Corona to accelerate,” Kirk wrote in a note to clients.
Constellation Brands’ stock
STZ,
rose 1.5% in afternoon trading Tuesday toward the highest close since Dec. 12, 2022, while Anheuser-Busch shares
BUD,
slumped 4.5% toward the lowest close since Nov. 10.
He noted that weekly scanner data has shown that Constellation’s beer portfolio outperformed the broader beer market by seven percentage points in early 2023, and that outperformance improved to 10 percentage points at the beginning of Bud Light’s market-share losses in April.
“With temperatures warming and substitutability with Bud Light increasing, recent weeks have seen 13 [percentage points] of outperformance,” Kirk wrote. “This trend should continue as Bud Light [declines/peak] over summer holidays.”
For Samuel Adams, Truly, Twisted Tea parent Boston Beer, Kirk raised his rating to buy, after being at neutral for at least the past three years. He raised his stock price target to $386 from $274.
Boston Beer’s stock
SAM,
jumped 6.8% toward the highest close since Feb. 15.
Earlier this year, Kirk was concerned that Truly hard seltzer’s weakness continued, offsetting Twisted Tea’s success, and that gross margins weren’t improving even after moving more production in-house.
Read more: Bud Light crisis: It’s unclear how U.S. volume drop will end, analysts say
“Now, we believe seltzer and Truly will benefit in the summer from Bud Light share losses (occasion overlap increases with warmer weather) and gross margin lift from production shift will be realized in 2Q (given inventory days timing),” Kirk wrote.
He believes that will shift investor focus away from Truly’s weakness and toward Boston Beer’s brands that are growing.
And while Wall Street expects the trends Boston Beer saw in the first quarter to continue throughout 2023, Kirk now believes the company will beat expectations for shipments and depletions, and sees opportunities for margins to also beat forecasts.
“While we had written at 1Q that the ‘timing of upside surprises remains unclear,’ we now believe the timing is Summer 2023,” Kirk wrote.
Constellation Brands’ stock has gained 5.7% over the past three months and Boston Beer shares have advanced 4.8%, while Anheuser-Busch’s stock has dropped 10.1% and the S&P 500 index
SPX,
has gained 5.9%.
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Canopy Growth Corp. ‘s U.S.-listed shares
CGC,
WEED,
rose 3.9% in premarket trades on Tuesday after the Canadian cannabis company announced a plan to consolidate its U.S. cannabis assets into a new holding company called Canopy USA. The holding company has an exchangeable share structure that is designed to trigger full ownership of U.S. cannabis investments and take advantage of U.S. cannabis market opportunities. Canopy USA will house Acreage Holdings Inc.
ACRHF,
Wana and Jetty and allow Canopy to exercise rights to own 100% of the companies. Third-party investors will hold 100% of the common shares of Canopy USA, the company said. Canopy Chief Executive David Klein said the company expects the U.S. market to be worth more than $50 billion by 2026. Constellation Brands Inc.
STZ,
which invested $4 billion in Canopy when Canada fully legalized cannabis for adult use in 2018, said it will convert its common stock holdings into new exchangeable shares, which will allow it to protect its own shareholder value, while retaining an interest in Canopy in non-voting and non-participating shares. That will allow the drinks giant to focus on its core beer, wine and spirits business. Constellation CEO Bill Newlands said the deal will allow the liquor company to “further reinforce our intent to not deploy additional investment in Canopy aligned with [the company’s] previously stated capital allocation priorities.” Shares of Constellation Brands are down 8.5% in 2022, compared to a loss of 20.3% by the S&P 500 [s spx], while Acreage shares have lost 61% of their value this year, compared to a 59% drop by the AdvisorShares Pure US Cannabis ETF
MSOS,
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