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Canandaigua Stock Getting Fizz Back

Bloomberg News

Canandaigua Brands Inc. shareholders have something to toast.

The company’s Class A shares rose Tuesday for the seventh-straight day on optimism that the biggest U.S. public winemaker’s expansion into premium-priced wines will continue to bolster profit growth.

Canandaigua, which makes Inglenook and Paul Masson table wines and distributes Corona beer in the U.S., rose $2 to $52.19. Though still down 10% on the year, the shares have gained 21% since June 21. The Class B shares rose $3.75 to $52.50.

The company has been moving into premium wines--those costing more than $6 a bottle--in response to a drop in U.S. table wine sales in the last year. In April, the company agreed to buy Franciscan Estates for $240 million in cash and assumed debt to expand into the premium wine market.

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“The stock was too cheap, so it attracted the value players,” said Credit Suisse First Boston analyst Martin Romm, who has a “buy” rating on Canandaigua shares. “Their fiscal first quarter was really excellent.”

Even with the recent rise in the stock, Canandaigua trades at about 13 times estimated earnings, well below the Standard & Poor’s 500 average.

Last week, the Fairport, N.Y.-based company said net income rose 7.6% in the fiscal first quarter to $14 million, or 77 cents a share, from $13 million, or 68 cents, a year earlier.

In addition to Franciscan, the company in the last year has acquired Simi Winery, a California maker of premium wines, and eight Canadian whiskey brands from Diageo to boost its presence in the North American liquor market.

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“Once we’ve digested the current acquisitions, I can see us doing more acquisitions, and that will help spur growth,” said Mark Maring, the company’s director of investor relations.


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