Constellation Brands Stock In Focus On Svedka Divestment: Retail Cheers The Deal

Shares of Corona beer-maker Constellation Brands (NYSE: STZ) were in focus Tuesday morning after the firm announced it would divest its Svedka brand to global spirits company Sazerac, lifting retail sentiment.

The transaction is expected to close in the coming months.

The deal is part of the beverage company's strategic efforts to further align its  wine and spirits portfolio with evolving consumer preferences and growing market sectors, focusing on "higher-end" wine and spirits brands and products, the company said in a press release.

Over the last few years, Constellation has divested the majority of its popular and mainstream wine and spirits brands, focusing on competing predominantly in the premium and fine wine and craft spirits segments.

Retail sentiment on the stock has improved to 'bullish' (69/100) from bearish (42/100) six months ago, while message volumes have continued to be in the high zone.

Constellation beat analyst estimates in its last earnings results. For the second-quarter, it posted adjusted earnings per share of $4.32, surpassing average Wall Street estimates of $4.08.

Roth MKM analyst Bill Kirk recently warned that Constellation is the most exposed to potential Trump tariffs on imports from Mexico, The Fly.com reported.

According to Kirk, Constellation could be exempted from the tariffs. He added Constellation would need a 12% beer price increase to fully offset a 25% increase in beer cogs.

“This transaction is another step forward in seeking to ensure that our wine and spirits portfolio is optimized to succeed and to meet our growth objectives," Bill Newlands, president and CEO, Constellation Brands, said in the release.

Jake Wenz, CEO of Sazerac added, “We are honored for this opportunity and excited to add SVEDKA to our global spirits portfolio featuring their award-winning vodkas, seltzers, and gins.”

Sazerac's alcohol and beverage brands include Buffalo Trace Bourbon, The Last Drop Distillers, Fireball Cinnamon Whisky,  Paddy’s Irish Whiskey, among others.

Constellation Brands stock is down 2.76% year-to-date. 

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