CONSTELLATION BRANDS Fuad Fadel Jim Fish Kevin Kaznica
CONSTELLATION BRANDS Fuad Fadel Jim Fish Kevin Kaznica Matthew Krajna TABLE OF CONTENTS Business Segments Key Risks Wine Spirits Crown Joint Venture Health of the Consumer Joint Venture uncertainty Financial condition Corporate governance Valuation Multiple Scenario DCF Sum of Parts Market Multiples Sell Recommendation: $17 Price Target Business Segments Wine Spirits WINE SEGMENT Constellation Lags industry CAGR of 3% Approx. 90% of sales Overall depletion trends lag industry Levered to the United States Industry Mature industry EM drive growth Value Trend Franzia Winetaps (The Wine Group) has largest market share of 7.9% Constellation lacks a Top 5 Wine Brand within the industry, by market share WINE GROWTH % Growth Wine Sales YoY 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% -20.00% Forecast 2.25% growth -20% Actual Decreasing CAGR Lagging industry CAGR of 3% 2012 2013 2014 2015 2016 2017 E E E E E E -0.97 -17.8 2.25% 2.25% 2.25% 2.25% 2.25% 2005 2006 2007 2008 2009 2010 2011 Growth 19.00 13.47 18.79 -1.83 -3.14 -7.93 5 Year Wine Sales CAGR 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E 2017E SPIRITS Constellation Approx. 10% of sales SVEDKA double-digit growth No EM exposure, small market share Industry Global competitors EM driving growth Driven by flavored vodkas SVEDKA GROWTH Geographic Reach SVEDKA primarily U.S. based U.S. consumer remains fragile CROWN IMPORTS Constellation Crown Imports ≈ 40% of EPS FY2011 43% of EPS FY2012 No solid commitment from Modelo beyond 2016 3% growth in Net Sales Industry Craft/Imports are fastest growing category Social trend away from “traditional” beers Key Risks Health of the Consumer Joint Venture Uncertainty Financial Condition HEALTH OF THE CONSUMER Dependence on U.S. Economy Not levered to EM or international markets U.S Economy seen as “fragile” Food & Beverage Off-Premise v. Personal Consumption Exp 15000 10000 5000 0 2009 1Q 2010 1Q Outlook for U.S. Economy PCE & Off-Premise consumption are flat 3Q Source: Bureau of Economic Analysis FY2012 Weaknesses: Weak consumer not able to trade up to premium Constellation took pricing on best wine brands No pricing power Decreasing volume trends Increased Marketing Spend Crown JV sales grew 3%, yet Equity Earnings decreased 6.3% F&B 3Q PCE 2011 1Q 3Q POSSIBLE JV OUTCOMES Key Dates & Outcomes Modelo must give notice by 2013 to terminate The current JV agreement expires in 2016 JV does not renew, Modelo imports own brands 2. JV does not renew, Modelo chooses new importer with more scale 3. JV renews 1. FINANCIAL CONDITION HIGHLIGHTS Cash Flows $500M sustainable Balance Sheet Quality High Debt Level Poor quality 50% of assets Goodwill/Intangibles Income Statement $2.6B on balance sheet $6B including purchase obligations and leases Low Times Interest Earned Reliance on Crown JV for 40% EPS No Dividend CREDIT RISK FY12 Earnings Release Target leverage ratio of 3.0-4.0x Results in debt level of $2,000M-$2,650M $2,600M / $664M = 3.92x projection New $1,000M share buyback Funded Could Market through NEW debt issuance increase leverage ratio will demand higher interest rate CORPORATE GOVERNANCE Private Company Characteristics Dual-Class share structure Over 50% of voting rights 11.81% Equity stake Elect majority of Directors Strong resistance to changes in class structure Source: GMI AGR: Aggressive accounting and governance behavior Strong Academic Support Harvard, Wharton, Stanford Entrenchment decreases performance Value Destruction Share repurchases VALUE DESTRUCTION EVA under different WACC assumptions 200.00 100.00 0.00 (100.00) (200.00) 7.18% WACC EVA (millions) (300.00) 10% WACC (400.00) 15% WACC (500.00) (600.00) (700.00) (800.00) 2007 2008 2009 Year 2010 2011 Value destruction at all discount rates ROIC lags cost of capital ACQUISITIONS o $5B in acquisitions since February 2001 o $3.3B of which was Goodwill/Intangibles o $1.25B in write downs & impairments since 2001 BUILD-UP RATE JUSTIFICATION Additional Risk Factors Private Company Aspect Governance Risks Company-specific risk Mid-Range WACC e.g. JV termination 10.41% Build-Up WACC 13.97% 18 16 14 Financial Condition 12 JV Risk 10 Corp Gov 8 SMID 6 MRP 4 Risk-Free Rate 2 0 Build-up Cost of Equity Valuation Multiple Scenario DCF Market Multiples DCF SCENARIOS 11 Scenarios Base Worst Best Possible Crown JV Impacts Efficiency Gains 5 & 10 Year Valuations Sensitivity Analysis 2 Discount Rates 3 EV/EBITDA Terminal Values 1. JV does not renew, Modelo imports own brands 2. JV does not renew, Modelo chooses new importer with more scale 3. JV renews Price Target: $17 FY 2012 EARNINGS RELEASE Constellation Brands Net Sales $2,654M EBIT $769M EPS $2.34 (tax benefits) Tax Rate 17% Growth -1.0% growth FY 2013 EPS FCFE Tax Rate $1.89-2.03 $425-475M forecast 34% Canisius College “Base Case” $2,661M $782M $1.89 35% 2.25% growth $2.09, 10% growth $440M estimate 35% MARKET MULTIPLES Median: 9.38 Average: 11.13 P/CF valuation price target of $16 P/E valuation price target of $22 Historical Avg. PE (Restated): 10.5 P/E multiple: 10.5 Projected FY2013 EPS: $2.09 Measures Constellation value as a whole Does not discount additional risks SUM OF PARTS Valuation Wine SVEDKA Crown JV 3 Scenarios Sensitivity Analysis 2 Discount Rates Appropriate Scenario Conservative Simple Average Price Target: $17 PRICE TARGET Average sum of the parts valuation $17 Average of all 11 scenarios WACC 10.49%, 13.97% $17.10 P/CF $15.60 P/E approach $22 SELL TARGET: $17 Price on 4/5/2012: $21.61 21.3% downside INVESTMENT SUMMARY Key Risks Low growth/mature wine industry Weakness of U.S. consumer Corporate governance weakness Value Destruction Share buybacks Crown JV uncertainty Weak financial condition Market is inadequately pricing in risks of STZ SELL Recommendation: Price target of $17 QUESTIONS? APPENDIX •Earnings Release (25) •Price Matrix (26) •Crown JV graph (27) •SG&A / 10yr scenarios (28) •Hispanic graph (29) •Modeled Growth (30) •Margins (31-32) •Diageo (33) •WACC (34-35) •Sum of Parts (36-39) PRICE TARGETS Scenario Scenario 4: EV/EBITDA Scenario 1 Scenario 2 Scenario 3 X: 10yr 10yr ($2B of 10 (BASE) (WORST) (BEST) (NO $2B CASH) CASH) Buildup Midrange WACC $14.54 $19.26 $23.24 $13.06 $17.52 $21.29 $19.08 $24.69 $29.44 $18.33 $26.11 $33.46 $11.37 $18.63 $25.58 Scenario Scenario 4: EV/EBITDA Scenario 1 Scenario 2 Scenario 3 X: 10yr 10yr ($2B of 9 (BASE) (WORST) (BEST) (NO $2B CASH) CASH) Buildup Midrange WACC $12.67 $17.03 $20.70 $11.28 $15.40 $18.87 $16.78 $21.94 $26.31 $17.19 $24.49 $31.35 $10.23 $17.01 $23.47 Scenario Scenario 4: EV/EBITDA Scenario 1 Scenario 2 Scenario 3 X: 10yr 10yr ($2B of 8 (BASE) (WORST) (BEST) (NO $2B CASH) CASH) Buildup Midrange WACC $10.81 $14.80 $18.17 $9.50 $13.27 $16.45 $14.47 $19.19 $23.18 $16.05 $22.86 $29.25 Average of all Buildup and Midrange scenarios is $17.10 $9.09 $15.38 $21.37 5yr- Crown Stress CASH Tested NOW Scenario 3, SG&A (BEST) $22.28 $28.47 $33.72 $19.20 $24.01 $28.03 5yr- Crown CASH 10 w/ LATER 5yr- Crown 5yr- Crown CASH CASH Average NOW LATER (BEST) (BASE) $12.94 $17.37 $33.63 JV con’t. $13.90 $21.98 $29.71 Stress 10 w/ 5yr- Crown 5yr- Crown Tested CASH CASH Scenario 3, NOW LATER test 1 JV con’t. $19.72 $25.41 $30.23 $18.46 $23.12 $27.02 $12.20 $16.49 $32.21 $12.76 $20.36 $27.60 5yr- Crown 5yr- Crown CASH CASH 10 w/ NOW LATER Stress Tested Scenario 3, test 1 (BEST) $17.16 $22.36 $26.75 $17.72 $22.24 $26.02 (BEST) $11.47 $15.61 $30.79 JV con’t. $11.62 $18.73 $25.49 $17.59 $22.07 $25.81 (see excel tab) $11.33 $15.78 $15.43 $21.41 $30.45 $28.58 (BASE) 5yr- Crown 5yr- Crown CASH CASH Average NOW LATER (BASE) $16.97 $21.32 $24.96 (BASE) $10.71 $14.69 $29.26 (see excel tab) $14.45 $19.75 $26.54 5yr- Crown 5yr- Crown CASH CASH Average NOW LATER (BASE) $16.35 $20.58 $24.11 (BASE) $10.09 $13.94 $28.06 (see excel tab) $13.12 $18.09 $24.51 CROWN JV POTENTIAL CATALYSTS EV/EBITD Stress A of 10 Tested Scenario 3, SG&A Buildup $22.28 Midrange $28.47 WACC $33.72 EV/EBITD Stress A of 9 Tested Scenario 3, test 1 Buildup $19.72 Midrange $25.41 WACC $30.23 EV/EBITD Stress A of 8 Tested Scenario 3, test 1 Buildup $17.16 Midrange $22.36 WACC $26.75 Average of Midrange $25.41 10 w/ JV con’t. $13.90 $21.98 $29.71 10 w/ JV con’t. $12.76 $20.36 $27.60 10 w/ JV con’t. $11.62 $18.73 $25.49 • Margin Expansion • Through Reduction in SG&A (Project Fusion) • From 20.5% of Sales to 15% over 5 years • We feel this type of efficiency is excessive • Need for increased promo and ad spend • Due to value proposition • Crown JV Continuing for another 10 years • We feel this is unlikely • Modeled 8% Crown Equity Earnings growth • BEST Case Scenario: • 5% Wine growth • 20% Svedka growth • 10% Crown JV growth $20.36 • Price Target $21, SELL OPPORTUNITY TO GROW CROWN EARNINGS • Hispanic population growth is also highly focused in a few key geographic markets • Strategic opportunity for Crown Imports • Increase market share through increased distribution efforts • Key states include California, Texas, Florida, New York, and Illinois. REVENUE & EPS GROWTH RATES EPS Growth modeled at 10% EBIT growth aggressively modeled at 5% Bucking 5 year negative growth trend FY12 MARGINS Gross Margin 40.1%, up 420bp YoY Operating Margin 20.3%, up 430bp YoY Upward biased changes due to divestiture of lower margin European and Australian wine business MARGINS COMPETITION: DIAGE0 Diageo: U.S. Spirits business driven by flavored Vodkas “[The U.S.] is showing very good signs of improvement. It’s not a snapback…Now the U.S. is not going to offer us the same growth that Brazil can.” Key takeaway: U.S. does not offer the growth that Emerging Markets offer Constellation Brands LACKS EM exposure Thus stuck with 90% of sales from a mature U.S. market Source: WSJ, March 26, 2012 WACC WACC SUM OF PARTS • Target Price of $17 with Conservative Scenario, using build-up and mid-level discount rates SUM OF PARTS • Wine value comes from “Best Case” scenario • PV of wine sales only • SVEDKA purchase price $384 million, adjusted for inflation, and multiplied by 4x to represent case vol growth • Crown valued as the PV of forecasted equity payments SUM OF PARTS • Crown value based on PV of future equity earnings • Includes options that will be exercised • Based on build-up method, discount rate of 13.97% SUM OF PARTS • Crown value based on PV of future equity earnings • Includes options that will be exercised • Based on build-up method, discount rate of 13.97% • Conclusion: Using both the build-up and mid-level discount rates, an average target price of $17 can be obtained, AFFIRMING SELL RECOMMENDATION Additional risk Build-up premiums (1-2% per item) PV OF GROWTH OPPORTUNITIES PVGO: The present value of growth opportunities is a tool to extract the market’s expectations on future growth potential for Constellation. Using the CAPM we determined a cost of equity of 10.41% for Constellation. PVGO for Constellation under current market conditions is 16.97%. Peer median of 46.52% Market does not feel that Constellation has much growth potential. Given that Constellation has lagged the wine industry growth rate of 3%, the PVGO is justified, especially compared to its peers. Key assumptions: EPS: 1.79 TTM restated Price: 423.62 on 1/12/12 WINE IMPORT DATA Imported wines ≈ 1/3 U.S. wine sales USD appreciating against the Euro and Aussie Dollar Floods market with competitively-priced alternatives This is a negative for Constellation, as the U.S. consumer is still trending towards value brands EPS WINE STZ Vincor, Robert Mondavi, Ravenswood, Arbor Mist, and Ruffino Approximately 90% of sales Lags the industry growth rate Sold only 12.7% of the wine cases during 2010 Negative EPS between 2008-2010 Negative organic growth in 2011 Extremely low exposure to emerging markets, leading to lack of revenue growth Industry: Smallest segment in the alcoholic beverage industry compared to beer and spirits 3% CAGR on average Mature and slow growth industry Large conglomerates, such as STZ Competitors are E & J Gallo, The Wine Group, Vina Concha y Toro, and Treasury Wine Estates 4-6% CAGR prior to the recession On-premise v. off-premise sales Value v. Premium Wine Sales Larger growth in off-premise sales than on-premise (use graph showing this off Bloomberg) Trend towards value brands continues Remains to be seen if producers can successfully persuade consumers to abandon value brands for premium Franzia Winetaps (The Wine Group), a value wine, has the largest market share of 7.9% High growth seen in developing markets, but mainly China where CAGRs are in the mid-teens WINE CRUSH DATA California’s 2011 wine grape crush, from all varieties, totaled 3,342,689 tons, down 7 percent from 2010 varieties accounted for the largest share of all grapes crushed, at 1,917,132 tons, down 7 percent from 2010. The 2011 white wine varieties crush totaled 1,425,557 tons, down 7 percent from 2010. On the price side, record highs were set for both red and white wine grapes average price for the 2011 crop of red wine grapes was $702.70, up 12 percent from 2010, while the average price for white wine grapes came in at $541.11, up 8 percent from last year. The 2011 average price of all varieties reached a record high of $588.96, up 8 percent from 2010 and 3 percent above the previous record high set in 2009. ON/OFF PREMISE SPIRITS STZ SVEDKA, Black Velvet, & Paul Mason Brandy Approximately 10% of sales Miniscule market share with many global competitors Lacks brand recognition that competitors have Growing at double-digit rate Since acquisition, Svedka is quadrupled in case sizes Driven mainly by SVEDKA Industry: 2nd largest market segment of alcoholic beverage industry Led by vodka and whiskey Diageo, Brown-Foreman, & Beam Global & Spirits Smirnoff, Absolut, Grey Goose, & Skyy Diageo controls the spirits market Shift towards spirits over wine and beer BEER STZ Crown Imports JV 43.6% of EPS in 2011 Equity Earnings No solid commitment from partners beyond 2016 JV between 2008-2010 was the only positive earnings segment for STZ Corona, Corona Extra, Corona Light, Modelo Especial, Negra Modelo, St. Pauli Girl, Tsingtao, & Victoria Without which, it would not have been able to cover interest payments Not a beer company Industry: Largest market share compared to wine and spirits Dominated by major companies Anheuser-Busch InBev, Miller Coors, Crown Imports, Growing trend towards Imports and Craft Brews in the US Double digit growth rate compared to stagnant growth for whole industry 16.4% volume growth compared to -2%; Dollar growth, craft up 17.5% compared to .3% for the industry Attempt by companies to innovate with new products, such as Bud Light Platinum recently Strategy: Fast-growing acquisitions by major companies Ex: SAB Miller’s acquisition of Foster’s Ex: Major companies acquiring craft breweries CROWN JV Company had negative earnings HEALTH OF THE CONSUMER • Personal Income rising, while personal savings decreasing, yet off premise spend on food/beverage flat ACADEMIC SUPPORT Manager’s protected from the market for corporate control tend to pursue inefficient investment products Democratic corporate governance strongly associated with higher relative returns Most democratic: Most dictatorial: 3.8 abnormal -5% Gompers, Ishi, Metrick Firm value increases with the cash-flow rights of the largest shareholder, but decreases when voting rights exceed cash-flow rights Journal of Finance August 2007; Masulis, Wang, Xie Claessens et al. Found a significant negative relationship between disproportional voting rights and firm value Gompers (Harvard), Ishii (Stanford), Metrick (Wharton) OPPOSITION TO MORE BALANCED CLASS STRUCTURE PROPOSAL 5 — STOCKHOLDER PROPOSAL Mr. Kenneth Steiner of 14 Stoner Avenue, 2M, Great Neck, New York 11021, who has indicated that he owns 1,100 shares of our stock, has given notice that he or his designee intends to make the following stockholder proposal at the Meeting. The Board recommends that you vote AGAINST the stockholder proposal. In accordance with applicable regulations, we include this stockholder proposal and supporting statement in the form proposed by Mr. Steiner: Equal Shareholder Voting RESOLVED: Shareholders request that our Board take steps to adopt a plan for all of our company’s outstanding stock to have one-vote per share. This would include all practicable steps including encouragement and negotiation with family shareholders to request that they relinquish, for the common good of all shareholders, any preexisting rights, if necessary… The Board of Directors recommends that you vote AGAINST Proposal 5. Unless you properly direct otherwise, the shares represented by your proxy, if properly submitted and not revoked, will be voted AGAINST such proposal. ADDITIONAL SCENARIOS Key Assumptions: Scenario 4 – “10yr No Real Growth & JV Termination”: Base Case, but with termination of JV. AB InBev would increase their stake in Grupo Modelo, triggering a cash payment of 4x EBIT to Constellation. In 2017, earnings from the Crown Imports JV will only incorporate 10 months due to the timing of the termination. Equity earnings going forward will be significantly impacted and no longer material. Constellation would receive a cash payment, estimated at $2 billion, upon notice being granted for FY2014. The scenario shows the effect of the joint-venture termination by Grupo Modelo. Scenario X – “10yr No Real Growth & JV Termination”: Base Case, but with termination of JV. AB InBev would increase their stake in Grupo Modelo, triggering a cash payment of 4x EBIT to Constellation. In 2017, earnings from the Crown Imports JV will only incorporate 10 months due to the timing of the termination. Equity earnings going forward will be significantly impacted and no longer material. Constellation would receive no cash payment. The scenario shows the effect of the joint-venture termination by Grupo Modelo. Stress Tested Scenario 3 – “Decreasing SG&A significantly”: Same as Scenario 3, but with SG&A decreasing as a perfect of sales from 20.5% to 15%. We feel this significant of an efficiency gain would be significant, but drastic, and unlikely. 5yr Crown Cash Now, Best Case -- Modeled Scenario 3 with a $2 billion cash payment in year 2014. 5yr Crown Cash Later, Best Case -- Modeled Scenario 3 with cash payment of $300 million approximating estimated 50% of BV of the joint venture, upon termination this payment would be received by Constellation. 10yr Model with JV Continuing -- Base case, but assuming 10yr model 5yr Crown Cash Now, Base Case -- Modeled Scenario 1 with a $2 billion cash payment in year 2014. 5yr Crown Cash Later, Base Case -- Modeled Scenario 1 with cash payment of $300 million approximating estimated 50% of BV of the joint venture, upon termination this payment would be received by Constellation. FINANCIAL CONDITION CASH CONVERSION CYCLE ASSET TURNOVER INVENTORY TURNOVER FIXED ASSET TURNOVER DEBT/EQUITY REVERSE ENGINEERING Reverse Engineering: Holding all else equal for Scenario 1: At WACC of 7.18%, in order to justify price approximating current levels: A growth rate of 5% in CWNA A growth rate of 30% in Spirits A COGS of 56% in all five years SGA of 17% in all five years Equity earnings growth rate of 20% Income tax rate of 19% 70% 60% 50% 40% 30% 20% 10% 0% Underlying Market assumptions Expected Levels GENERATIONAL SEGMENTS Total estimated US Population 2011 312 M Boomers (2010) 79 M Millenials (2010) 77 M Generation X (2010) 51 M Source: US Census, Pew Research Baby Boomers (42-60) Millenials (18-25) Generation X (26-41) Other SMID PREMIUM U.S. mid-caps have historically provided only minor diversification benefits, having a correlation to large caps of more than 0.94 over the past 10 years. Mid-caps have behaved similarly to U.S. small-cap equities, exhibiting a correlation of 0.98. The volatility of return on mid-cap stocks as measured by standard deviation was 18.8%, more than 3 percentage points greater than that of large caps. One way to interpret this number is to assume a normal distribution of returns. If you expect mid-caps to earn an average return of 6% in any given year, there is at least a 2% chance that the return will be less than 31.6% (two standard deviations less than the average). Viewed in this light, the 36% drop in 2008 should be viewed as unlikely but not impossible. Source: Morningstar P/S Common to use P/S valuation for: New company Company with accounting issues Value based on total net Sales P/S Projected Valuation Average 2011 P/S P/S Multiple 0.99 1.30 Projected FY13 Net Sales 2,737.89 2,737.89 Projected FY13 Shares (Diluted) 221 221 Target Price 12.21 16.15 2009-2011 Average 1.02 2,737.89 221 12.68 Standard Deviation of 0.33 Highest target price is $16.15 = CONFIRMS SELL SEGMENT BASED P/S Segment P/S Using projected sales for each segment & the 2000-2011 average P/S and the 2011 P/S Use Crown earnings to find what investors are willing to pay for those earnings because STZ does not give Crown Revenue but Crown earnings Highest target price: Based on 2011 P/S alone, which is above average, a target price of $19.16 is obtained CONFIRMS SELL As Equity Earnings for Crow n Summation P/S Projected Valuation CWNA P/S CWNA Projected Net Revenue CWNA Price Target *Used Projected Shares Above = 221 Crow n Imports P/S Average 2011 P/S 1.37 1.70 2,673.67 2,673.67 16.60 20.55 16.38 17.82 Crow n Imports Projected Equity Earnings Crow n Imports Price Target *Used Projected Shares Above = 221 Svedka P/S Svedka Projected Revenue Svedka Price Target *Used Projected Shares Above = 221 284.37 21.08 284.37 22.93 1.10 268.18 1.34 1.10 268.18 1.34 CWNA Target as % of Earnings (82.87%) Crow n Imports as % of Earnings (8.81%) Svedka Target as % of Earnings (8.3%) Total Target Price 13.76 1.86 0.11 15.72 17.03 2.02 0.11 19.16 P/CF WINE IMPORT DATA Imports grew 3.9 percent to 109.8 million cases. account for 32 percent of the volume of wine sold in the U.S. As the USD appreciates in value against the Euro and Aussie Dollar, imported value wines become cheaper to import, thus flooding the market with value brands This is a negative for Constellation, as the U.S. consumer is still trending towards value brands CROWN JV POTENTIAL OUTCOMES 1. 2. 3. Modelo gives notice by 2013 that the JV will NOT renew after 2016, and Modelo will import their brands into the U.S. Modelo does NOT renew JV, chooses different party (other than STZ) as importer Modelo renews the JV for another 10 years BUILD-UP RATE JUSTIFICATION Significant Governance Risk Private Company Aspect Company-specific risk Governance Discount SMID discount MRP e.g. JV termination Risk-free Build-up Cost of Equity WACC 10.41% WACC 13.97% CAPM UNDERSTATES WACC • CAPM • Book Weights WACC 7.18% • Market Weights WACC 7.81% • Effective debt cost Average 7.42% BASE CASE SCENARIO Scenario 1 – “5yr Base Case”: CWNA grown at 2.25%/year Spirits growing at 10%/year driven by SVEDKA sales Equity earnings, driven by Crown Imports, grew 8%/year WORST CASE SCENARIO Scenario 2 – “5yr Worst Case”: CWNA, Spirits, and Crown Imports sales grow at an inflation rate of 2%. Based on the fact our “Worst Case” scenario was a SELL rating, we did not do further sensitivity testing of lesser growth rates for wine, spirits, or Crown segments. BEST CASE SCENARIO Scenario 3 – “5yr Best Case”: CWNA sales growing at 5% YoY, which outpaces the industry average Spirit Sales driven by SVEDKA growth at 20% Equity earnings from Crown grow at 10% YoY. SUM OF PARTS Valuation Conservative: Possible: $17 $20 Unlikely: $24 Unlikely & Possible: $22 All: $20
© Copyright 2024