Option Trade
Constellation Brands, Inc. (NYSE:STZ) Calls 
Tuesday, 5th April, 2016

**OPTION TRADE: Buy the STZ Jul 2016 160.000 call at approximately $3.50. Place a pre-determined sell at $7.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.40.

by Ian Harvey

April 05, 2016

Constellation Brands, Inc. (NYSE: STZ), a producer and marketer of beer, wine and spirits with operations in the United States, Canada, Mexico, New Zealand and Italy, is scheduled to announce its results for the fourth quarter of fiscal 2016 tomorrow, April 6th. The fourth quarter of fiscal 2016 ended on February 29, 2016. Constellation Brands’ sales exceeded analysts’ consensus estimate in fiscal 3Q16. For fiscal 4Q16, analysts expect net sales to come in at $1.5 billion, which reflects 12.3% growth on a year-over-year basis. This double-digit growth rate estimate is based on the strong performance of the company’s beer business.

Constellation Brands has outperformed the Consensus Estimates for five straight quarters now, with an average of 10.5% over the past four quarters. Results were driven by the company's strategy of boosting long-term growth through acquisitions and expansions, its efforts to include new products in its wine and spirits businesses as well as strong demand for beer. The company's top and bottom lines are benefiting from strength in the beer business, improving trends at its wine and spirits business, and solid overall depletion trends.

Constellation Brands expects this growth momentum to continue, which is also reflected in its raised fiscal 2016 earnings guidance. These factors bode well for the company's upcoming results.

Constellation Brands, Inc. has a 52-week low of $114.49 and a 52-week high of $155.68. The stock’s 50 day moving average is $144.49 and its 200-day moving average is $140.23.

Constellation Brands Inc. has shown a weekly upbeat performance of 1.85 percent which was maintained at 6.19 percent in 1-month period. The year-to-date (YTD) performance reflected a 7.42 percent above last year. During the past three months the stock gains 6.13 percent, bringing six-month performance to 22.48 percent. The stock holds the market capitalization of $30.11B.

For fiscal 2016, the company sees comparable earnings to range between $5.30 and $5.40 per share versus the $4.44 per share reported in fiscal 2015. Earnings, on reported basis, are projected to be in the range of $5.05 - $5.15 per share compared to the $4.17 per share reported in fiscal 2015.

The company also increased its free cash flow guidance for fiscal 2016 to a range of $475 million - $525 million, largely driven by higher earnings for the beer business, timing of capital expenditures and lower income tax payments.

In the last quarter:-

• Net income attributable to CBI was $270.5 million or $1.22 per class B convertible common stock compared to $222.2 million or $1.01 per class B convertible common stock in the prior year period.

• Non-GAAP net income was $289.1 million or $1.42 per share compared to $248.3 million or $1.23 per share reported a year ago.

• For the third quarter, the company generated consolidated net sales growth of 6% that totaled $1.64 billion from $1.54 billion in the same period of last year. This reflects organic net sales growth on a constant currency basis of 6% and Meiomi acquisition benefit, partially offset by unfavorable currency impact.

Constellation Brands, Inc. had its target price hoisted by equities researchers at Goldman Sachs from $166.00 to $170.00 in a research report issued last Wednesday. Goldman Sachs’ price objective would suggest a potential upside of 13.55% from the stock’s current price.

Also, several other equities research analysts have recently commented on the company.

• Vetr raised shares of Constellation Brands from a “hold” rating to a “buy” rating and set a $151.89 target price on the stock in a research note on Wednesday, January 13th.

• Barclays began coverage on shares of Constellation Brands in a research report on Thursday, December 17th. They set an “overweight” rating and a $155.00 price target on the stock.

• Susquehanna reiterated a “hold” rating and issued a $160.00 price objective on shares of Constellation Brands in a report on Sunday, January 17th.

• RBC Capital increased their price objective on Constellation Brands from $148.00 to $165.00 and gave the stock an “outperform” rating in a research report on Wednesday, December 16th.

• Finally, Stifel Nicolaus raised their target price on Constellation Brands from $162.00 to $174.00 and gave the stock a “buy” rating in a research note on Friday, January 8th.

Six research analysts have rated the stock with a hold rating, nine have assigned a buy rating and one has assigned a strong buy rating to the company. Constellation Brands currently has a consensus rating of “Buy” and an average target price of $170.00.

Harvey’s Options Volatility Indicator

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the STZ Jul 2016 160.000 call at approximately $3.50. Place a pre-determined sell at $7.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.40.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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