STZ Sells $600 mn Senior Notes - Analyst Blog
2012年4月18日 - 1:21AM
Zacks
In an effort to enhance its financial flexibility and focus on
future growth prospects, the leading wine and spirit distributor
Constellation Brands Inc. (STZ), has recently sold
$600 million worth of senior notes, Reuters reported.
According to news, earlier the company has planned to sell $400
million of senior notes. The new senior notes have been issued at
par with a coupon rate of 6% maturing on 1st May, 2022.
A consortium of Bank of America Merrill Lynch
(BAC), JP Morgan Chase & Company (JPM), Rabo
Securities USA and Barclays Capital are the Underwriters of this
issuance.
Borrowing costs have gone down significantly, marking a record
low, and in turn, facilitating the companies to obtain easy
financing at compelling prices. Corporate bonds are in high demand
as U.S. treasuries are yielding low rates, driving investors toward
the bonds issued by the sound companies.
Debt offers of big companies are being oversubscribed, providing
the corporation’s the option to price their offerings at lower
rates. Hence, several companies are coming up with debt offerings
to generate interest expense savings by refinancing their
outstanding borrowings.
We believe the transaction will strengthen the company’s
financial position. Though Constellation Brands has an obligation
to repay $330.2 million of debt in fiscal 2013, the company now has
the flexibility to pay at ease.
Recently, Constellation Brands ended its fiscal 2012 with a
healthy balance sheet and cash flows. During the fiscal,
Constellation generated $784.1 million of cash from operations
compared with $619.7 million in the previous year.
Apart from this, the company achieved a record free cash flow of
$715.7 million. This enabled the company to reduce debt, as well as
fund stock repurchases and acquisitions. Moreover, the company
anticipates generating a free cash flow in the range of $425
million to $475 million during fiscal 2013.
Our Recommendation
Constellation Brands is the largest wine company in the world
and commands a dominant position in the premium wine segment in the
U.S. The company is also a leading producer of wines in Canada and
New Zealand. This provides a competitive edge to the company and
bolsters its well-established position in the market.
Moreover, we believe that the company’s strategic initiative of
expanding footholds in the U.S wine industry along with focus on
brand building and promotion will accelerate its growth
opportunities while strengthening its market position. Moreover, in
an effort to generate strong margins, Constellation Brands is also
focusing on higher priced segment across all key categories.
However, the company faces intense competition from other
well-established players in the industry, including Beam
Inc. (BEAM), Brown-Forman Corporation – B
(BF.B) and Diageo plc (DEO). Moreover,
Constellation Brands also encounters competition from local and
regional players in the respective countries. Consequently, this
may dent the company’s future operating performance.
We currently have a Zacks #3 Rank (short-term Hold rating) on
the stock. Our long-term recommendation on the stock remains
Neutral.
BANK OF AMER CP (BAC): Free Stock Analysis Report
BEAM INC (BEAM): Free Stock Analysis Report
BROWN FORMAN B (BF.B): Free Stock Analysis Report
DIAGEO PLC-ADR (DEO): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
CONSTELLATN BRD (STZ): Free Stock Analysis Report
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