STZ Concludes Deal With The Wine Group: Here's What You Should Know

Constellation Brands, Inc.’s STZ premiumization strategy has been encouraging, as demonstrated by the accelerated growth of its Power Brands. The company has been seeing strength in the beer business for a while now. 

In the latest announcement, the company has unveiled that it has concluded its earlier-announced deal with The Wine Group to divest its mainly mainstream wine brands and related inventory, facilities and vineyards from its wine collection. The brands divested to The Wine Group consist of Woodbridge, Meiomi, Cook’s, Robert Mondavi Private Selection, SIMI and J. Rogét sparkling wine.

More on STZ’s Latest News

The company’s wine portfolio has a collection of exclusive wines from top regions across the world, mainly priced at $15 and above. This encompasses the renowned Napa Valley brands Robert Mondavi Winery, Schrader, Double Diamond, To Kalon Vineyard Company, Mount Veeder Winery, and The Prisoner Wine Company; the My Favorite Neighbor family of wine brands from Paso Robles; Tuscan producer Ruffino Estates and Ruffino Prosecco; gems such as Sea Smoke from Santa Barbara’s Santa Rita Hills AVA, Lingua Franca from Oregon’s Willamette Valley, and others. 

The amazing collection is complemented by STZ’s outstanding craft spirits portfolio comprising High West whiskey, Nelson’s Green Brier whiskey, Mi CAMPO tequila and Casa Noble tequila.

The company remains on track to execute its repositioned portfolio, being committed to the high-end that strictly aligns with the consumer-led premiumization trends, which will aid it in boosting performance within the wine & spirits segment over time.

What’s More for Constellation Brands?

Following the completion of the transaction, Constellation Brands’ fiscal 2026 view and outlook for fiscal 2027 and fiscal 2028 issued on April 9 remain intact. The company expects its Beer brands to remain strong. For fiscal 2026, management anticipates 0-3% net sales growth for the beer segment. STZ had anticipated enterprise operating income, on a reported basis, to increase 765-783% for fiscal 2026. The company expects operating income to improve 0-2% for the beer segment.

STZ updated its fiscal 2027 and 2028 (medium-term) outlook. The company expects enterprise net sales growth of 2-4% for the period, with an increase of 2-4% in the beer business and a flat to 3% rise in the wine and spirits segment. Management estimates the enterprise operating income margin to be 35-36% for the medium term, including 39-40% for the beer business and 22-24% for the wine and spirits business. 

The company anticipates earnings per share (EPS) growth of mid-single-digit to low-double-digit for fiscal 2027 and low-single-digit to mid-single-digit for fiscal 2028. Constellation Brands forecasts operating cash flow to grow between high-single-digit and low-double-digit in the medium term.

Constellation Brands is on track with its plans to invest in the next phase of capacity expansion in Mexico. This will help meet the potential demand for the high-end Mexican beer portfolio, including the emerging Alternative Beverage Alcohol sub-space, which includes hard seltzers. By fiscal 2028-end, management anticipates expanding capacity in Mexico to roughly 55 million hectoliters to aid the growth of its high-end beer brands. The company is on track to support the industry-leading beer business, reset its cost base and redefine its portfolio. It is focused on boosting distribution gains and innovation.

However, Constellation Brands has been struggling with higher selling, general and administrative costs for a while. High packaging and raw material costs from continued inflationary pressures, as well as increased depreciation and operating costs from brewery capacity expansions, are likely to be concerns. Shares of this Zacks Rank #3 (Hold) have gained 1.5% compared with the industry’s 9% growth in the past three months.

Stocks to Consider in the Consumer Staples Space

Nomad Foods NOMD, which manufactures frozen foods, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

NOMD delivered a trailing four-quarter earnings surprise of 3.2%, on average. The Zacks Consensus Estimate for Nomad Foods’ current financial-year EPS indicates growth of 7.3% from the year-ago number. 

Mondelez International MDLZ, which is a leader in the snack food industry, currently carries a Zacks Rank #2 (Buy). 

MDLZ delivered a trailing four-quarter earnings surprise of 9.8%, on average. The Zacks Consensus Estimate for MDLZ’s current financial-year sales indicates growth of 5.3% from the year-ago number. 

Utz Brands UTZ manufactures salty snacks under popular brands and has a Zacks Rank of 2 at present. UTZ delivered a trailing four-quarter average earnings surprise of 6.9%. 

The Zacks Consensus Estimate for UTZ’s current financial-year sales and EPS implies growth of 1.4% and 10.4%, respectively, from the year-ago numbers.

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This article originally published on Zacks Investment Research (zacks.com).

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