Earnings season is over, but we are continuing to update price targets, buy/sell ratings, etc. for companies that we currently cover in our EquityAnalytics department. Today, we have updated several companies. They include – AmBev (ABV), Brown-Forman (BF.B), CCU (CCU), Dr. Pepper Snapple (DPS), Hansen's Natural Foods (HANS), Heineken (HINKY.PK), The Boston Beer Co. (SAM), and Constellation Brands (STZ.B). Our EquityAnalytics division covers more than 100 companies in different industries. We have price targets on each company, Buy/Hold/Sell ratings, and scores for Growth, Profitability, Financial Health, Management, and Value. The following is an update on our current reports. Full reports can be seen at theoxengroup.com.
The chart below shows new ratings, price targets, and buy/sell ranges versus old ones:
ABV – Upgrade from Sell to Hold, Increase PT from $27 to $32
We upgraded AmBev as the company has gotten an upgrade in our price target. The company is still more overvalued than we would like to see and do not think this is a place to add to the position. The company has a future P/E at 20, which is relatively high for a beverage company. Any tick down in growth or flattening of growth would definitely be met with some selling pressure. The latest quarter saw another round of solid growth for the company. We dropped our discount rate on the stock as growth remained strong and margins continue to be strong as well. We believe there are better opportunities out there though in the beverage industry.
BF.B – Maintain at Hold, Increase PT from $74.50 to $98
Brown Forman is a stock that is looking quite excellent right now. The company scores quite well on our Management, Financial Health, and Profitability scores. They have had a really nice end of the year and look poised for a great 2012. We expect them to move towards $100 in 2012 and with any slight declines should be bought up. The company has a large portion of sales in whiskey, which have been showing a very strong trend over the past twelve months. Flavored whiskey is a big reason for this, and we continue to see whiskey outperforming. The dollar may hurt their sales in 2012 as Europe has been strong for them, but the company is hitting record sales levels. We continue to believe sales will be strong in 2012, and the stock will become more valuable moving forward.
CCU – Downgrade from Buy to Hold, Increase PT from $74 to $68
The price of CCU has come up and is no longer as valuable to be a Buy. We like the company as a strong growth play in Brazil, but we are more concerned now about the ability for CCU to maintain significant growth. We believe they are a nice play for the BRIC exposure in a company with a strong economic moat and good balance sheet. The company looks to grow sales by around 5% in 2012. One issue for the company may be margins. The company has started to see these slip. We increased our PT, though, as the company's discount rate came down with the company's beta dropping.
DPS - Maintain at Hold, Increase PT from $42.50 to $46.50
Dr. Pepper Snapple is a Hold in the beverage industry. The company is fairly priced and not overvalued or undervalued in P/E currently. The company has a dividend at over 3%, which is very attractive and do have some upside in 2012. The company got a PT bump on several new developments. We believe the company's introduction of Dr. Pepper 10 will allow for the company to get a bump in new sales in 2012. Additionally, the company is launching a $1B buyback program that will bring the stock price up as equity value is divided by less shares outstanding. We are limited in our target though as the company is forecasting heavy increase in costs of goods.
HANS - Maintain at Buy, Increase PT from $115 to $120
Hansen got another boost in our price target as we continue to believe in the company's ability to grow and deserve higher multiples than other companies in the industry. They are currently operating with a 35 P/E. We do not see this as a significant overvaluation, though because the company is growing at 30% in FY11 and probably over 15% in FY12. This is much higher than competition and justifies a higher P/E ratio. Our boost comes from another beat of our expectations in the latest quarter. While margins dropped, we believe that this is an industry-wide issue that will affect all companies rather than any specific company and will not strongly affect pricing since its industry-wide. International expansion is going well and gross margins were actually not poor.
HINKY - Maintain at Hold, Decrease PT from $25.50 to $23.50
We dropped our price target of Heineken as things are not looking strong for this company. There is a lot of competition for Heineken in the beer market, and we do not see them as being able to maintain margins and market share. Craft beers have become very popular in the higher end marketplace, and Heineken has no way to maintain market share without acquisitions. Marketing can only go so far for the company. We see their margins continue to drop. Further, we dropped our targets for sales and operating income. The company is not a holding to have anyways as it is traded on the pink shares market. It is not a financial instrument we recommend as an investment.
SAM - Maintain at Hold, Increase PT from $94.50 to $123
The Boston Beer Co., which is the maker of Sam Adams, is one of the companies gaining market share on Heineken. Craft beer has become a significant fad in the drinking area, and it should maintain its place for the near-term future. We think 2012 will be a strong year for SAM. The company is pretty fairly valued with a P/E at 25, and we see the company with some upside in 2012. Overall, though, the company is a nice hold right now and should only be bought on weakness. Additionally, the company does not operate a dividend; thus, until it becomes a Buy, we prefer other beverage makers that offer yields through dividends that appear more fairly valued.
STZ - Upgrade from Hold to Buy, Increase PT from $19 to $28
Constellation Brands was upgraded to a Buy after a significant price increase. We are much more bullish on STZ in 2012 than we were in 2011. The major reason for our upgrade is that company had a great quarter and seems poised to pop in 2012. The company has been shrinking their business line, selling off Australian and U.K. lines to focus on a core portfolio that they can grow organically. The company has been dropping debt by putting cash to pay off debt loads that has increased their equity value. Further, we believe margins will improve as the company has focused on their core lines. STZ seems to be taking the right steps to do better, and we believe they are a great Buy now.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.