"Here's to alcohol, the rose colored glasses of life." - F. Scott Fitzgerald
Americans do few things better, and do more of, than drink alcohol. Indeed, the United States ranks 16th in the world in per capita consumption of beer at 20 gallons, and is second only to China in total consumption. And our imbibing doesn't stop with beer. Americans consume roughly 480 million gallons of distilled spirits per year. With all due respects to baseball, it is arguable that our national pastime is alcohol consumption.
And with summer fast approaching, there will be plenty of opportunities to drink. From barbecues to baseball games, to adopted holidays like Cinco de Mayo, Americans will be throwing back millions of beers and spirits in the upcoming months. Of course, there are a plethora of corporations-- ranging from the very large to the very small-- making and distributing our alcohol. In this article, I will examine some of these companies' fundamentals to see which ones offer the best opportunities for long-term growth and income. Figures and company profile information are from Yahoo Finance and/or Google Finance.
Anheuser-Busch InBev (BUD) a brewing company, engages in the production, marketing, distribution, and sale of beer. The company offers a portfolio of approximately 200 beer brands. Its international principal brands include Budweiser, Stella Artois, and Becks; multi-country brands consist of Leffe and Hoegaarden. The company also produces and distributes soft drinks. Anheuser-Busch InBev SA/NV sells its products in 120 countries. The company was founded in 1366 and is headquartered in Leuven, Belgium.
BUD is the largest of the brewers, with a market cap of $157.37 billion. The company enjoys a 47.7 percent market share beer sales in the U.S., a 41 percent share in Canada, and a whopping 70 percent share in Brazil. BUD's trailing earnings are $4.45 per share, which at the current price, equates to a P/E of 22.07, with a more modest forward P/E of 17.99, based on 14.7 percent estimated growth for next year.
The stock seems a bit on the expensive side, with a price-to-book ratio of 3.91, and a Graham "fair price" of $50.71. The company does offer shareholders a 2.25 percent dividend yield, with a payout ratio of 49.7 percent. Prior to the merger with InBev, Anheuser-Busch paid its dividend quarterly. Since the merger, the dividend has been paid annually and has grown 87.3 percent since April 2011. Analysts estimate 6.4 percent earnings growth per year over the next five years.
Molson Coors Brewing Company (TAP) has a diverse portfolio of owned and partner brands, including signature brands Coors Light, Molson Canadian, Carling and Staropramen, as well as craft and specialty beers such as Blue Moon, Creemore Springs, Cobra and Doom Bar. The company was formerly known as Adolph Coors Company and changed its name to Molson Coors Brewing Company in February 2005 as a result of its merger with Molson Inc. Molson Coors Brewing Company was founded in 1873 and is headquartered in Denver, Colorado.
TAP has a market share of $9.18 billion. The company has a 30 percent market share in the U.S. and a 40 percent share in Canada. Trailing earnings are $2.44 per share, with a P/E of 20.75. Forward P/E is very attractive at 11.82, based on 6.5 percent estimated growth over the next year. The stock seems fairly priced, with a nice price-to-book ratio of 1.18 and a Graham "fair price" of $49.09. TAP pays its shareholders a 2.5 percent dividend yield, with a 52 percent payout ratio. The company has grown its dividend by 60 percent over the past five years. Analysts estimate 4.8 percent earnings growth over the next five years.
Diageo plc (DEO) engages in producing, distilling, brewing, bottling, packaging, and distributing spirits, beer, wine, and ready to drink beverages in North America, Europe, Africa, Latin America, the Caribbean, and the Asia Pacific. It offers a range of brands, including Johnnie Walker Scotch whisky, Crown Royal Canadian whisky, JeB Scotch whisky, Buchanan's Scotch whisky, Windsor Premier Scotch whisky, Bushmills Irish whiskey, Smirnoff vodka, Ketel One vodka, Cîroc vodka, Captain Morgan rum and rum based products, Baileys Irish Cream liqueur, Jose Cuervo tequila, Tanqueray gin, and Guinness stout.
The company also offers other spirits brands that comprise Gordons gin and vodka, Old Parr Scotch whisky, Bells Scotch whisky, The Classic Malts Scotch whiskies, Seagrams 7 Crown whiskey, Yeni Raki, and Bundaberg rum. In addition, it offers other beer brands, which include Malta Guinness non-alcoholic malt, Harp lager, Tusker lager, Senator lager, and Red Stripe lager; wine brands comprising Blossom Hill, Sterling Vineyards, and Beaulieu Vineyard; and ready to drink brands, which comprise Smirnoff Ice, Smirnoff cocktails, Bundaberg ready to drink, and Jose Cuervo cocktails. The company was founded in 1886 and is based in London.
DEO has a market cap of $75.67 billion. Trailing earnings are $6.45 per share, with a P/E of 18.76. Forward P/E is 16.97, based on 10.5 percent estimated earnings growth over the next year. The company seems very expensive at its current price, with a price-to-book ratio of 7.55 and a Graham "fair price" of $48.58. DEO pays its shareholders a dividend yield of 1.80 percent, but has been very erratic in its payouts over the past five years. The current payout ratio is 111 percent. Analysts estimate 10.2 percent earnings growth over the next five years.
Constellation Brands Inc. (STZ) Constellation Brands, Inc. is a wine company. The Company is a marketer of imported beer in the United States. through its investment in Crown Imports, LLC (Crown Imports), a joint venture with Grupo Modelo, S.A.B. de C.V. (Modelo) pursuant to which Modelo's Mexican beer portfolio (the Modelo Brands) are imported, marketed and sold by the joint venture in the United States. Constellation Brands, Inc. was founded in 1945 and is headquartered in Victor, New York.
STZ has a market cap of $8.85 billion. Trailing earnings are $2.11 per share, with a P/E of 22.81. The forward P/E is 14.78, based on 18.5 percent estimated earnings growth over the next year. The company's price-to-book ratio is 3.16, with a Graham "fair price" of $27.20. STZ does not pay a dividend. Analysts estimate 11.45 percent earnings growth over the next five years.
Boston Beer Co. Inc. (SAM) engages in the production and sale of alcohol beverages primarily in the United States, Canada, Europe, Israel, the Caribbean, the Pacific Rim, and Mexico. The company sells approximately 50 beers under the Samuel Adams or the Sam Adams brand names; 10 flavored malt beverages under the Twisted Tea brand name; and 5 hard cider beverages under the Angry Orchard brand name.
It sells its products to a network of wholesale distributors, who in turn sell to retailers, such as pubs, restaurants, grocery chains, package stores, stadiums, and other retail outlets. The company sold approximately 2.7 million barrels of its proprietary products, and brewed or packaged approximately 19,000 barrels under contract for third parties. The Boston Beer Company, Inc. was founded in 1984 and is based in Boston, Massachusetts.
SAM has a market cap of $2.02 billion. Trailing earnings are $4.39 per share, with a high P/E of 36.33. Forward P/E is 28.12, based on 13.6 percent estimated earnings growth over the next year. The company is very expensive, with an 8.16 price-to-book ratio and a Graham "fair price" of $43.66. SAM does not pay a dividend. Analysts estimate 19.2 percent earnings growth over the next five years.
Brown-Forman Corporation (BF.B) engages in manufacturing, bottling, importing, exporting, and marketing alcoholic beverages. The company provides wines, ready-to-drink products, vodka, whiskey, tequilas, liqueur, and other distilled spirits. It offers products primarily under the brand names of Jack Daniels, Gentleman Jack, Southern Comfort, Finlandia, Antiguo, Canadian Mist, Chambord, Don Eduardo, Early Times, el Jimador, Herradura, Korbel California, Maximus, New Mix, Old Forester, Little Black Dress, Collingwood, Pepe Lopez, Sonoma-Cutrer, Tuaca, and Woodford Reserve.
The company sells its products to wholesalers and state governments, as well as directly to retail stores. Brown-Forman Corporation primarily sells in the United States, Australia, the United Kingdom, Mexico, Poland, Germany, France, Russia, Canada, Japan, Turkey, Spain, Italy, the Czech Republic, South Africa, and Brazil. The company was founded in 1870 and is headquartered in Louisville, Kentucky.
BF.B has a market cap of $14.97 billion. Trailing earnings are $2.70 per share, with a P/E of 25.93. Forward P/E is 23.52, based on 11.2 percent estimated earnings growth over the next year. The company has a very high price-to-book ratio of 9.96 and a Graham "fair price" of $20.79. The company pays its shareholders a 1.60 percent dividend yield, with a payout ratio of 33 percent. BF.B has increased its payout by 12.3 percent over the last five years. Analysts estimate 12.17 percent earnings growth over the next five years.
Beam, Inc. (BEAM) manufactures and sells distilled spirits worldwide. The companys principal products include bourbon whiskey, tequila, Scotch whisky, Canadian whisky, vodka, cognac, rum, cordials, and ready-to-drink pre-mixed cocktails. It offers its products under the Jim Beam Bourbon, Makers Mark Bourbon, Sauza Tequila, Courvoisier Cognac, Canadian Club Whisky, Teachers Scotch, Pinnacle Vodka, Laphroaig Scotch, Knob Creek Bourbon, Basil Haydens Bourbon, Kilbeggan Irish Whiskey, Cruzan Rum, Hornitos Tequila, Skinnygirl Cocktails, and Sourz Liqueurs brand names, as well as combined Local Jewels and Value Creators brands.
The company sells its products to wholesale distributors, state governments, third party distributors, global or regional duty free customers, other spirits producers, and joint ventures. The company was formerly known as Fortune Brands, Inc. and changed its name to Beam Inc. in October 2011. Beam Inc. was founded in 1904 and is headquartered in Deerfield, Illinois.
BEAM has a market cap of $9.74 billion. Trailing earnings are $2.38 per share, with a P/E of 25.54. Forward P/E is 20.80, based on 11.0 percent estimated earnings growth over the next year. The company has a price-to-book ratio of 2.16 and a Graham "fair price" of $39.27. BEAM pays its shareholders a 1.4 percent dividend yield, with a payout ratio of 34 percent. Since instituting a dividend in November 2011, the company has increased payout by 21.1 percent. Analysts estimate 11.68 percent earnings growth over the next five years.
Conclusion: In terms of current valuation, libations stocks seem somewhat overpriced. However, each of these companies offers at least somewhat modest growth going forward. I am somewhat partial to BEAM, but only because I'm a native Kentuckian. Individual investors should comb the data provided and choose for themselves which factors are most important in their portfolio.