Constellation CEO: worries are overdone – business remains strong
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Constellation CEO: worries are overdone – business remains strong

Rob Sands, the outgoing CEO of Constellation Brands, the US alcoholic beverage giant behind brands like Corona beer, thinks the market is failing to see the strength behind his company. After a lacklustre year so far, Sands thinks that a “total overreaction” to recent news has left the stock “an absolutely fantastic value.” And, he’s put his money where his mouth is: Sands (and his brother Richard, Constellation’s chairman of the board) have just acquired 1.1 million shares in the company “in the last week or so”!

Constellation Brands’ share price has depreciated by 2% so far this year

graph 15 constellation

Source: Yahoo Finance

In an interview with CNBC, Sands explained what he thought was holding Constellation’s price down (for now): “It’s totally a function of the change in our guidance. And the change of our guidance is also totally a function of our anticipating a disappointing year on the wine and spirits side.” Earlier, the company slashed guidance on earnings by 25 cents – according to Sands, this is a reflection of common knowledge in the industry: low-end wines are suffering at the moment.

He continued: “That segment of the wine industry is performing very poorly. It’s something that we identified, actually, several months ago, and we said that we were pursuing strategic alternatives for that segment of our business. In fact, we are, and expect to come to some conclusions relative to that in the near future.”

But a recovery in wine isn’t all investors should be looking at – Sands says Constellation has a lot going for it. As well as innovative investments, he added: “This remains a strong cash-generation business. We’re in a great position, we continue to be in a great position, and the strength of our beer business is going to continue to have us in a great position going forward.”

Disclosure

Dominion holds Constellation Brands in its Global Trends Luxury Fund.


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