A number of senior executives and members of the board of directors of Constellation Brands (NYSE:STZ) have recently sold portions of their holdings in the company. Spring Ahead April 2011 with Our Flagship Newsletter and Winning Stock Ideas>>
The company has underperformed the broader market year-to-date. Its shares have decreased by 2% versus a 6.2% increase in the S&P 500 (NYSE:SPY). Over the longer term its shares have a mixed record. Its 1-year, 5-year and 10-year returns are 28.7%, -9.5%, and 136.05%. The corresponding returns for the S&P 500 are 12.5%, 3.1%, and 18.3%.
The company has a surprisingly thin net profit margin of 2.95% for its most recent fiscal year. Its operating margin is 9.24% and its EBITD margin is 49.62%. The company is paying large amounts of interest, taxes, and depreciation. Its return on average assets was an anemic 1.23% and its return on average equity was equally sparse 4.43%. Its debt to equity ratio is 137.69, meaning that its debt load is 1.3769 times as great as its equity base. Its market capitalization is around $4,540,000,000, and of that its debt is $3,740,000,000. This large debt balance explains the decline between its EBITD margin of 49.62% and its net profit margin of 2.95%.
Comparing Constellation Brands’ woeful financial performance with that of its principal competitor, Brown-Forman Corporation (NYSE:BFB), is instructive: Brown-Forman’s net profit margin for 2010 was 13.92%, its operating margin was 22.01%, and its EBITD margin was 23.84%. Its return on average assets was 13.09% and its return on average equity was 24.14%. It carries $759 million in debt on its balance sheet, against a market capitalization of almost $10 billion, meaning that its debt/equity ratio is only 40.55.
Following are details of recent inside transactions at Constellation Brands:
- Jeaneanne K Hauswald, who is a Director, exercised 12,000 options at a cost of $0 per option, on October 8th, 2010. She subsequently sold 12,000 shares at a market price for $18.61 on October 8th. The net proceeds for these transactions were $223,339. She presently holds 19,712 shares worth $426,764.80 as of the most recent trading. In addition to serving on Constellation Brands’ board, she is also Managing Partner, Solo Management Group, LLC; retired from The Seagram Company Ltd.
- Paul F. Hetterich, who is an Executive Vice President, exercised 31,300 options at a cost of $12.41 per option, on October 14th. He subsequently sold 31,300 shares at a market price of $19.03 on October 14th. His net proceeds for these transactions were $207,152. He presently holds 59,783 shares in the company, which are worth $1,296,250.45 as of the most recent trading.
- Thomas J. Mullin, who is Executive Vice President and General Counsel, exercised 62,400 options at a cost of $8.87 per option on October 13th. He subsequently sold 62,400 shares at a market price of $19.14 on October 13th. The net proceeds for these transactions were $640,773. He presently holds 97,863 shares worth $2,118,733.95 as of the most recent trading.
- Keith W. Wilson, who is Executive Vice President & Chief Human Resources & Administrative Officer, exercised 42,800 options at a cost of $11.80 per option on October 12th, and 60,000 options at a cost of $11.75 per option on November 5th. He subsequently sold 42,800 shares at a market price of $19 per share on October 12th and 60,000 shares at a market price of $20 per share on November 5th. The net proceeds for these transactions were $803,374. He presently holds 44,577 shares worth $965,092.05 as of the most recent trading.
Other insiders are:
Board of Directors:
- Richard Sands: Chairman of the Board of Constellation Brands, Inc.
- Robert Sands: President & Chief Executive Officer, Constellation Brands, Inc.
- Jerry Fowden: Chief Executive Officer, Cott Corporation
- Barry A. Fromberg: Chief Financial Officer, Hospitalists Now, Inc.
- James A. Locke III: Senior Counsel to the law firm of Nixon Peabody LLP
- Paul L. Smith: Retired from Eastman Kodak Company
- Mark Zupan: Dean of the William E. Simon Graduate School of Business Administration, University of Rochester.
Non-Board Executive Officers
- Robert Ryder: Executive Vice President and Chief Financial Officer, Constellation Brands, Inc.
- Jay Wright: President, Constellation Wines North America
About the company: Constellation Brands, Inc. produces and markets beverage alcohol in North America, Europe, and Australia, and New Zealand. The Company has a portfolio of brands across the wine, imported beer, and distilled spirits categories. Constellation conducts its business through wholly owned subsidiaries as well as through a variety of joint ventures with various other entities.
Its competitors include the aforementioned Brown-Forman (NYSE:BFB), Castle Brands, Inc. (AMEX:ROX), Diageo plc (NYSE:DEO), Willamette Valley Vineyards (NASDAQ:WVVI), Craft Brewers Alliance (NASDAQ:HOOK), and Molson Coors Brewing (NYSE:TAP)