Constellation Brands Inc.'s turnaround continues to show promise, while the strength of Brown-Forman Corp.'s Jack Daniel's whiskey products helped push its profit higher, an analyst said Wednesday.
Kaumil Gajrawala of UBS said in a client note that wine and spirits company Constellation Brands had solid results during the fiscal year's first half and should be able to improve its margins and boost returns.
The analyst predicts the company's restructuring of its international wine businesses will help buffer against losses and produce positive cash flow.
Gajrawala reaffirmed Constellation's "Buy" rating and $21 price target. The company's stock dropped 28 cents to $15.87 in afternoon trading.
The analyst was also pleased with Brown-Forman's quarterly performance, as its earnings rose 3 percent on Tuesday to 99 cents per share to top the 84 cents-per-share estimate of analysts surveyed by Thomson Reuters. These estimates typically exclude one-time items.
The liquor company, based in Louisville, also lifted its full-year profit forecast.
Gajrawala said Brown-Forman's quarter was strong, and increased its price target to $50 from $41, but remains cautious on the rest of the year due to promotions and weak consumer spending.
Shoppers have tightened their purse strings during the recession, with many trading down to cheaper alcoholic beverages when they do make purchases or buying less frequently or not buying as much as they used to.
Gajrawala maintained Brown-Forman's "Sell" rating.
Shares of the company dropped 61 cents to $51.51.