Bank Of America Initiates Coverage On STZ

Bank of America is initiating coverage on Constellation Brands Inc. (NYSE: STZ) and shares its reasons for liking the company currently.

According to Bank of America, “We initiate coverage of Constellation Brands (STZ) at UW-30%. We appreciate Constellation's shift in priorities in recent years from debt-financed acquisitions to portfolio optimization via divestitures and debt reduction. While STZ bonds currently trade well inside both the HY Food (~6.9%) and Broad Market (~7.0%) indices, we acknowledge their relative liquidity vs. many other names within our universe, making at least some exposure appropriate within diversified HY portfolios. That said, in the context of STZ's strong/stable free cash profile even amidst uninspiring trends in its core wine business, we view more aggressive share repurchases and/or a resumption of M&A activity as more likely than an IG upgrade (BB+ at S&P) over the near-to-medium term. We would expect any such levering activity to be more conservative than has been exhibited in the past.”

STZ closed yesterday at $21.17.