Morgan Stanley Sez Market Underestimating Constellation’s Long-Term Growth; Ups Targets
Lotsa positive comments popping about Constellation’s beer prospects these days, and not just from execs at Gold Network distrib mtg last week. Today, Morgan Stanley’s Dara Mohsenian dug deep into recent IRI data, survey responses from 60 Constellation distribs and more to raise his topline grown and margin targets going forward. Scanner data for Dec 2014 plus Jan-Feb this yr shows near-term acceleration in Constellation growth, Dara notes. Then too, distrib survey showed 42% of respondents said Constellation volume accelerated in early 2015 and only 12% reported a slowdown. Throw in “favorable” feedback in talks with distribs in Dallas and improving overall US industry trends and that gives Dara “confidence that longer-term drivers of the business and a US recovery are playing out.” So he boosted his “5-year beer volume forecast by 100 basis points to +6.75% (+8.5% revenue CAGR).” Like some other analysts, Dara also sees “upside” to Constellation’s execs’ guidance of operating margin in mid-30s and forecasts about 37%. Finally, while most investors use Constellation’s beer industry peers to value biz, its much higher growth and margins compare better with “high growth CPG peers with similar characteristics,” like Monster, Boston Beer, Brown Forman, in Dara’s view. Using that group suggests current valuations are low and “if we valued STZ’s beer business in-line with peers with similar financial characteristics, investors would get STZ’s wine business essentially for free.”
BA Revs Doubled in 3 Yrs; Grew Another 20% to Over $20 Mil in 14; Surplus Up 69%
Back in 2011, Brewers Assn revs were $10.5 mil, $1 mil behind NBWA. But in last 3 yrs, BA revs doubled to $21.1 mil, including another $3.5 mil, 20% jump in 2014. Brewers Assn now gets very close to as much rev as Wine Inst, and several times Beer Institute. Events still really drive the bus for the BA. Events from revs up $2.55 mil, 30% last yr to $10.8 mil, slightly over 50% of total BA revs. But event operations expenses up under 6%. Partly as a result, BA got massive increase in surplus last yr. Up $1.7 mil, 69% to $4.2 mil. BA now up to 2447 brewery members, and 74% of operating brewers are members. Number of members jumped 470 in last yr. BA staff now over 50.