Don't Buy Molson Coors, Buy This Stock Instead

Today, shares of Molson Coors Brewing Company (TAP) surged over 14% after Anheuser-Busch InBev (BUD) approached SABMiller (SBMRY) about a takeover deal. The reason that Molson Coors popped is that the company may get the chance to purchase SABMiller’s stake in MillerCoors LLC, the joint venture between the two companies. MillerCoors is responsible for selling Miller Lite, Coors Light, Blue Moon, Keystone and others in the United States.

However, this near-term excitement doesn’t change the fact that TAP doesn’t have the fundamentals to prop up the stock over the long run. In Portfolio Grader, it barely scrapes by with a C-rating. And, despite having a solid 2.0% dividend yield, TAP also falls flat in Dividend Grader. So, while others have popped the champagne on TAP, I have another beverage stock of choice…

Constellation Brands Inc. (STZ) is one of the leading wine, beer and spirits companies in the world. It is part of the S&P 500 Index and is a Fortune 1000 company. In total, STZ has more than 100 brands, sells its products in approximately 100 countries and operates 40 facilities around the world. I’m sure many of its brands are familiar names to you, such as Robert Mondavi wines, SVEDKA Vokda and Corona beers.

The company has had an impressive run, due to a one-two punch of strengthening its existing brands and introducing new products, as well as solid growth in the wine industry. But I see plenty of further upside from here, and that’s because of its newly consolidated beer business, Crown.

In summer 2013, Constellation brands completed its acquisition of Grupo Modelo’s U.S. beer business for $4.75 billion. So Constellation Brands now has exclusive rights to sell Grupo Modelo’s beer brands in the U.S.: Corona, Corona Light, Modelo Especial, and Negra Modelo. This, among other things, has helped Constellation Brands outperform the U.S. beer industry in sales for the past five years running.

Constellation Brands recently kicked off its fiscal year on a high note with its Q1 2016 earnings report. Companywide net sales climbed 7% year-on-year to $1.63 billion, above analysts’ estimates of $1.62 billion. Net income climbed from $206.7 million to $238.6 million, a 15.4% increase. Excluding one-time items, adjusted earnings per share was $1.26, beating the $1.24 consensus EPS estimate by 1.6%.

Encouraged by its growing beer business, Constellation Brands lifted its earnings forecast for FY 2016. The company now expects adjusted EPS in the range of $4.80 to $5.00, above its previous forecast of $4.70 to $4.90 EPS. This adjusted guidance is also on the higher end of the Street view of $4.88 per share. I consider STZ an excellent buy.

Sincerely,

Louis Navellier

Louis Navellier

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