Thursday, January 04, 2007

Portfolio Meteor Shower

Today, we get to see some falling stars. The portfolio's #5 holding is taking a beating. Constellation Brands (STZ) announced its earnings this morning, and they came in a couple pennies shy of analysts' estimates. It appears that their UK sales were really hurt by an unexpected increase in the supply of cheap Austrailian wine making that market that much more difficult to compete in.

They now see that this isn't going to be a one-time miss, and the company lowered its earnings outlook accordingly. STZ now expects this year's earnings to lie in the $1.65 - $1.70 as compared to their previous forecast of $1.72 to $1.76.

In light of today's news, Deutsche Bank downgraded the stock to a Hold from Buy with a price target of $28. They did mention that the stock might be attractive in the mid-$20's. Well, that's pretty much where they are now. At the moment, shares are trading around $25.50, down roughly 10%. Not much else to say, really... enjoy the meteor shower.


gaamblor said...

I've been waiting for a buying spot in this so i was interested...and then again i look at the balance sheet

Goodwill, intangibles and Inventory are 6b of their 9b in assets

Inventory is up 25% since feb...last year in the same timeframe it was up 12.5%
I guess thats part of the miss but it seems like more problems ahead

Did they make an aquisition that explains the 1b jump in goodwill? I see they bought someone for a billion in april but surely some of that went into tangible assets?

Brute Force said...

The Vincor acquisition was a biggie for them ($1.2B cash + about 200MM debt). That is the reason for the jump in goodwill. And, some of it did go to intangible assets, which can be seen from the ~30% jump.

I think the company is run well, and I'm definitely in the stock for the long haul. If you're looking at a shorter time frame, then I'd be more inclined to pass on it. Might be deadish money for a little while.