September 7, 2018 / 8:07 AM / 2 months ago

BUZZ-Jefferies picks Constellation Brands over Brown-Forman and Molson Coors

** Jefferies initiates coverage on alcohol producers: sets “buy” rating for Constellation Brands, “hold” for Brown-Forman and “underperform” for Molson Coors Brewing Co

** Analyst Kevin Grundy says YTD under-performance on Canadian marijuana producer Canopy Growth investment/concerns around operating margin pct creates attractive entry point to own STZ shares

** Grundy says STZ’s investment in Canopy gives company a foothold in rapidly growing cannabis market; last month STZ said it will invest another $4 bln in Canopy

** For BFB, Grundy is positive on spirits segment, particularly its core bourbon segment and expects growth drivers to continue

** However, BFB’s full valuation and sustaining delivery vs recent quarterly results setting a high bar skews risk-reward modestly to the downside - Grundy

** For TAP, analyst expects sales to decline over FY18-22 centered on its challenged mainstream brand portfolio in a declining US beer market

** Also expects limited improvement in margins within lower half of TAP’s 30-60 bps p.a. target and says near-term balance sheet catalysts are unlikely

** Sets TAP’s price target at $55, BFb at $49 and STZ at $283

** YTD, TAP down 19 pct, STZ has fallen ~9 pct, while BFB declined 0.3 pct (Reporting by Brijesh Patel in Bengaluru)

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