Constellation Brands Uncorks Market Share

(This Constellation Brands article has been corrected to reflect the quarterly profit decline of Willamette Valley Vineyards.)

VICTOR, N.Y. (TheStreet) -- Shares of Constellation Brands (STZ) edged higher Monday after a Citi analyst reiterated a buy rating on the stock, noting the company recently boosted its share of the U.S. wine market for the first time in more than a year.

Already the world's biggest wine company, Constellation Brands saw a slight 0.2% increase in market share to 15.6% of the U.S. market in the four weeks ended Aug. 7, according to Citi analyst Vivien Azer. The tick higher comes after the company posted consistent declines since April 2009.

"We find these improving trends encouraging as we believe they reflect the successful implementation of STZ's distribution change," Azer said, adding that she expects Constellation Brands' efforts "to continue driving improved market shares and sales growth."

Shares of Constellation Brands closed Monday at $16.68, up 2 cents. Volume of 1 million was half the issue's trailing three-month daily average. Year-to-date, the stock is up 4.6%.

U.S. wine sales remained "robust" even as discretionary spending continued to be a concern, the analyst said, with U.S. wine category sales up 5.7% year-to-date, according to Nielsen.

In line with recorded wine sales growth so far this year, Constellation Brands upped its forecast in early July. The company expects category sales growth of 1-2% for 2010, 100 basis points ahead of its prior outlook.

Azer was encouraged by the recent word from Constellation Brands that it would continue to focus on improving profitability in its international wine business, even though the segment accounts for just 5% of its earnings before interest and tax. The analyst said she heard from industry sources Constellation Brands had sold its Australia-based Amberley Estate vineyard while retaining the Amberley brand.

Azer also kept intact her $21 price target on Constellation Brands' shares on the view that its "improving market share trends, coupled with healthy category growth" provide "increased confidence in the company's ability to deliver improved sales growth" in the second half of fiscal 2010.

Citi currently expects Constellation Brands to earn $1.77 per share in fiscal 2011 on revenue of $3.38 billion, and $2.00 per share in fiscal 2012 on revenue of $3.47 billion. The average analysts' estimates for these periods are for earnings of $1.72 a share on revenue of $3.37 billion and $1.88 a share on revenue of $3.46 billion respectively.

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