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Constellation Brands Profits Are on the House

NEW YORK ( TheStreet) -- There's nothing Wall Street hates more than uncertainty. While some companies are successful after having gone through periods of transition, the process can be unsettling for investors, especially when stock valuations are in disarray.

While Constellation Brands (STZ - Get Report), known for its fine wine and spirits, has executed well over the past couple of years by selling off its less-appealing alcohol brands, it has always had issues about weak organic growth. Not to mention, management has gone through periods of acquiring rivals that have failed to pay off for shareholders.

[Read: Why Google Rocks and Microsoft Stinks]

On the heels of better-than-expected third-quarter results (including an 88% surge in revenue), the vodka behemoth satisfied the Street's thirst for growth. With earnings-per-share of $1.10 per share, 20% ahead of estimates, credit management for making the right decision in keeping higher-end brands like Negro Modelo and Svedka.

The advantages that management envisioned upon the acquisition of Grupo Modelo's distribution rights are certainly beginning to pay off. With cash flows surging 61% year over year, I believe it's only a matter of time before the Street comes to its senses and stop overstating the merits of organic growth -- at least with this story.

Not to downplay the metric, but as with other beverage giants such as Coca-Cola (KO) and Anheuser-Busch InBev (BUD) that have taken the similar acquisitive routes, Constellation Brands, from its deals, not only has become a cash-generating machine, but management has also produced impressive returns on capital.

Let's not forget, analysts weren't completely sold on several of these decisions, including the company's aggressiveness in emerging markets. But as I've said on more than one occasion, management didn't have much choice. And it wasn't as if rivals like Heineken (HINKF) were generating better volumes, either.

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