by Ian Harvey
October 09, 2018
OUT WHILST THE GOING IS GOOD!
GREED CAN BE THE UNDOING OF A GOOD PROFIT!
Inc. Class A (NYSE: STZ)
Constellation Brands reported earnings on Thursday, last week, after the market closed, and has continued to climb higher since. An option call trade was recommended to “Armchair Trader” Members on Monday, October 01, 2018, based on bullish notes, rising earnings, an exceptional job of putting together a strong portfolio of much-loved products, including the well-known beers Corona and Modelo, and a recent $3.8 billion investment in Canopy Growth (NYSE: CGC). This investment caused STZ’s stock price to fall as investors worried that Constellation paid too much for the investment as they only had a majority interest in Canopy as compared to owning it outright; but provided an excellent entry price for this options trade.
PATIENCE PAYS OFF!
YOU NEED TO BE IN TO PROFIT!
The beer and spirits specialist, Constellation Brands, Inc. Class A (NYSE: STZ), will report earnings before the market opens. The consensus earnings estimate is $2.58 per share on revenue of $2.24 billion; but the Whisper number is for $2.61 per share. Consensus estimates are for year-over-year earnings growth of 4.45% with revenue decreasing by 2.49%.
Earnings have been rising, and are expected to rise 7.8% during the current year, and an additional 10.6% next year.
Constellation Brands has been trending higher in the four weeks leading up to its earnings report and the stock could build on its recent gains if the company tops estimates as expected.
In the past four quarters, Constellation has beaten expectations three times and missed only once - which was the most recent quarter.
The beer and spirits specialist has done an exceptional job of putting together a strong portfolio of much-loved products, including the well-known beers Corona and Modelo. In an era in which many beer drinkers are moving beyond the most popular domestic names in the industry, Constellation has positioned Corona in particular as distinctive from other brands.
Constellation is also making major moves to expand. Craft beer has been a key growth area within the broader category, and Constellation's purchase of Four Corners Brewing opens the door to potential new products in the future.
** OPTION TRADE: Buy STZ JAN 18 2019 235.000 CALL at approximately $3.50.
Place a pre-determined sell at $7.00.
Also include a protective stop loss of $1.70.
The Result So Far………
Constellation Brands was a big mover on Thursday, last week, as the company saw its shares rise more than 5% on the day. The move came on solid volume too with far more shares changing hands than in a normal session. The stock was driven after the company reported stellar second-quarter fiscal 2019 results.
Constellation Brands’ sales grew 10.3% on a year-over-year basis to $2.30 billion in the second quarter of fiscal 2019. Analysts were expecting sales of $2.25 billion. The company’s sales growth in the second quarter was higher than the 6.1% growth in the first quarter of fiscal 2019 and the 3.2% growth in the second quarter of fiscal 2018.
Constellation Brands’ sales growth in the second quarter was a result of the impressive performance of the company’s beer division and an improvement in the top line of its wine and spirits segment.
Sales of Constellation Brands’ wine and spirits segment grew 9.3% to $772 million driven by the favorable timing of shipments in the second quarter. Higher volumes of branded wine and spirits contributed $54.2 million to the segment’s top-line increase. Shipment volumes increased in the second quarter in advance of anticipated logistics and transportation constraints in the third quarter.
Friday, last week, STZ’s stock price continued upwards; and then again yesterday hitting a high of $236.62 before settling at $228.67, or 2.46%, at close of the normal market session.
So, for “Armchair Trader” members, who managed to execute this trade recommended by Stock Options Made Easy; and had an exit price already established, profits of 100% were made.
Entering the option trade at a cost of $3.50 or less; and the sell price on the option was set at $7.00; a profit of 100% was made in less than week. Even with a background of an overall negative market Constellation Brands stock price has continued to climb; which has resulted in the recommended options trade sell-price of $7.00 being reached yesterday. Therefore, one options contract would provide a profit of $350.00; or 100% Profit.
A NICE FINISH TO THE WEEK!
Constellation Brands continues to expect its beer segment net sales to grow in the 9% to 11% range in fiscal 2019, which ends on February 28. The demand for the company’s Mexican beer brands and favorable pricing are expected to drive the beer segment’s sales growth in the current fiscal year.
Constellation Brands continues to focus on the high-end segment of the US beer market and is on track to expand its production capacity and enhance its distribution to support the growing demand.
Analysts have been busy since the STZ report……
1. Deutsche Bank's Steve Powers maintains at Buy, price target lifted from $233 to $245.
The earnings report and conference call solidifies the bullish view that the beer business is seeing "robust" momentum, Powers said in a report. Concerns entering the quarter of increasing cost of growth are now "misplaced."
The wine business did show signs of continued struggles at the low-end price point, but the company as a whole remains a "rare growth story" within the consumer packaged goods business.
2. Morgan Stanley reiterates a Buy rating on Constellation Brands on its view that the long-term potential of the Constellation beer business is being overlooked amid concerns on the Canopy investment,
"We believe outsized beer depletion growth looks sustainable in 2H19/FY20 with healthy base business momentum, confirmed by Q2 results, and a strong innovation pipeline," writes analyst Dara Mohsenian.
Constellation's rebuilding beer gross margins and attractive valuation are also called out.
MS has a price target of $255 on Constellation vs. the 52-week trading range of $198.85 yo $236.62.
3. Pivotal Research reaffirmed their buy rating on shares of Constellation Brands (NYSE:STZ) in a research report published on Friday. They currently have a $300.00 target price on the stock, up from their prior target price of $265.00.
“We could have said that we were so dazzled by STZ, 2Q report and outlook, and CEO Rob Sands indominable bullishness, that we just couldn’t put words to paper! However, the truth is in the author’s own vineyard, we had 33 tons of grapes to harvest yesterday. While I hate to publish research a day late, this was one report that benefitted from some marinating in the mind before putting words and digits on paper. CEO Rob Sands was truly on fire – declaring: “given Constellation’s leadership position in the high-end U.S. beer market further runway for margin expansion throughout the business, unique leverage to the emerging cannabis space and an attractive valuation, I believe Constellation will continue to be a multiyear double-digit EPS compounder.” This was a beautiful quarter.”” Pivotal Research’s analyst wrote.
4. Constellation Brands had its price target boosted by Bank of America from $235.00 to $240.00 in a research note published on Friday. The firm currently has a buy rating on the stock.
5. Constellation Brands had its target price lifted by investment analysts at Wells Fargo & Co from $270.00 to $275.00 in a research report issued to clients and investors on Friday. The brokerage currently has an “outperform” rating on the stock. Wells Fargo & Co’s price target would suggest a potential upside of 23.22% from the stock’s current price.
6. Macquarie set a $245.00 price target on Constellation Brands in a report published on Friday. The firm currently has a buy rating on the stock.
ACTION TO TAKE…….
** A New Options Trade To Consider: Buy STZ JAN 18 2019 240.000 CALL at approximately $5.00.
Place a pre-determined sell at $10.00.
Also include a protective stop loss of $2.00.
As you would have by now realized, some of our trades are based on earnings predictions. This is not to say all trades recommended to members follow this pattern, but it is obvious that it applies in this case; and during earnings season this strategy of predicting earnings has been very profitable.
Sometimes it is our approach to predict whether a company will beat or miss estimates, whether the stock will appreciate or depreciate as a result and what strategies investors and traders can use – such as found with the “Earnings Predictions Program”. This type of prediction is based on thorough investigation and fundamentally based research, and the results have been very exceptional.
Strategies to Consider……
It is also worth considering, when options trading earnings reports – “Do we exit on already existing profits or leave the companies to report their earnings and hope for bigger profit?” .....READ MORE.....
"Trading Capital Management" is a key component of your trading strategy. The strategy, on which we base our trades to achieve maximum profit, and to minimize loss, is contingent on using an equal amount of money for each trade.……continue reading this article……
Our proven track record says it all!!
Members of Stock Options Made Easy are provided with an extensive reason as to which direction a stock will move after earnings, followed up by a recommended options trade.
If you not a member and interested in being part of this profitable action just CLICK HERE.
Other Membership Options…….
If you interested in "Earnings Predictions" just click here……
or "Mentorship Program".....click here....