Goldman Sachs Comments On Constellation Brands Following Recent Earnings

Constellation Brands STZ FY4Q11 of $0.35 was $0.08 above Goldman's estimate driven primarily by modestly higher EBIT in Wine and Crown Imports as well as $0.04 from a lower tax rate. STZ issued FY12 guidance of $1.90-$2.00, which does not include share buybacks. Goldman raises its FY12 estimate by $0.15, to $2.03, primarily to reflect a lower tax rate, better JV income, and incorporation of a $500 mn share repurchase program. It also raises FY13/FY14 to $2.42/$2.84 from $2.10/$2.36, which assumes STZ uses a majority of its free cash flow to buy back stock in the out-years. Goldman Sachs continues to harbor some concern over recent softness in STZ's US wine sales. While management appears hopeful it can pace depletion growth in line with the wine category growth, it believes higher promotional spending may be required, given the competitive backdrop. Goldman Sachs has a $23 PT and Neutral rating on STZ STZ closed Thursday at $21.79