UBS Likes Global Beer and Liquor Companies

By Jon C. Ogg Updated Dec 23, 9:36AM EST · Published May 2, 9:10AM EDT

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If there is one sector on Wall Street that seems to never go out of favor, its companies that make, sell and distribute liquor, beer and wine. For global companies involved in this industry, the United States is the number one country in the world for profits. Our love affair with alcohol, and our growing consumption as our population ages to the legal drinking limit, makes us the number one target for companies marketing alcoholic beverages.

In a recent survey of U.S. spirits wholesalers, analysts at UBS A.G. (NYSE: UBS) found out that the wholesalers are positive on the U.S. market and volume growth for their products, but not nearly as optimistic as the spirits companies themselves. Wholesalers may be slightly more cautious on the market outlook as (1) consumer confidence indicators have been very volatile, and (2) wholesalers’ confidence outlook may be more focused on volume than value growth, and volume growth has moderated due to higher industry focus on pricing.

Despite any increase in pricing moderating volume growth, U.S and international sales continue to be strong. Against a solid backdrop of growth, the team at UBS has a list of stocks to buy that just may add some sizzle to a portfolio.

Beam Inc. (NYSE: BEAM) reported earnings today, and the news was good. The bourbon maker beat earnings estimates by $0.10 per share and reaffirmed guidance for the rest of the year. The Thomson/First Call estimate for the stock is $64.

Anheuser-Busch InBev S.A./N.V. (NYSE: BUD) recently added Mexican brewer Grupo Modelo to its portfolio of products and has commenced a cash tender for the balance of the shares its does not already own. The consensus price target for the stock is $110. With shares at about $95, does this make Budweiser the King of Beers for analysts?

Constellation Brands Inc. (NYSE: STZ) produces and markets beverages around the world. The company recently announced a $1.55 billion dollar debt offering to help finance its purchase of Crown Imports, which will make it the sole importer of the popular Mexican beer Corona. The consensus price target for the stock is $54.

Brown-Forman Corp. (NYSE: BF-B) is another UBS stock to buy. The company provides wines, ready-to-drink products, vodka, whiskey, tequila, liqueur and other distilled spirits. The consensus for the stock is $74.

Diageo PLC (NYSE: DEO) has one of the largest portfolios of well-known spirit brands in the world. Its shares are trading near a 52-week high, and the company has posted solid earnings growth. The consensus estimate for the stock is $134.17.

Boston Beer Co. Inc. (NYSE: SAM) sells almost 50 different beers under the popular Sam Adams brand. The consensus price target for the stock is $138. This number is almost $30 below where the stock is currently trading.

Molson Coors Brewing Co. (NYSE: TAP) has been a prime benefactor in the growth of beer consumption in the past year. The consensus for the stock is $47.

Though consumers can be a fickle bunch and tastes often change on a whim, brand preference for the spirit companies is usually their biggest ally. While volumes on certain products rise and fall as demographics change, one thing is for sure. The worldwide market for alcoholic beverages is not going away anytime soon.

About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.