Shares of Constellation Brands (STZ) climbed 5% by midday trading Wednesday, the latest among a series of big gains in so-called vice stocks.
The Victor, N.Y.-based alcoholic-beverage producer, whose beer labels include Corona and Pacifico, delighted investors with a morning report of a quarterly earnings beat and talks an initial public offering of Constellation's Canadian wine businesses.
"We are in the early process of evaluating an IPO of this business and we plan to make a final decision later this calendar year depending on market conditions," CEO Robert Sands said on a Wednesday morning call with analysts. "If an IPO is completed, the proceeds are expected to be used to manage debt and our other capital allocation priorities."
The talk of a potential IPO of Constellation's Canadian businesses, which inlclude eight wineries on about 1,700 acres, coincided with the unveiling of a fourth-quarter earnings beat of 4%, based on adjusted earnings per share of $1.19, as well as robust quarterly sales of $1.54 billion, which surpassed consensus analyst forecasts by 1.5%.
Sands attributed much of the gains to sales growth among Constellation's beer portfolio, which he said was the number-one gainer in the high-end U.S. market, especially led by Corona Extra and Modelo Especial.
"These brands are two of the hottest brands in the industry and delivered 25% of U.S. beer category industry growth last year," Sands said. "Our flagship Corona Extra brand has been the number one imported beer brand for almost 20 years and today is the number five beer brand overall in the U.S. industry."
And shares of Constellation's -- which have climbed more than 33% over the past 12 months -- is part of a larger peer group that has persistently been beating the market, as Real Money reported.
Paul Caughlin, whose Longroad Asset Management fund has assembled a portfolio of stocks tied to alcohol, firearms and tobacco companies, posted a gross return in its global-consumer fund of more than 25% in 2015, vs. a mild dip in the broader S&P 500.
Part of the key to Coughlin's success has been a diverse range of consumer brands -- which include gunmakers Smith & Wesson (SWHC) and Sturm Ruger (RGR); alcohol producers Constellation Brands (STZ) and Molson Coors (TAP); as well as cigarette giants Philip Morris (PM) and Reynolds (RAI) -- is is their tendency to engender customer loyalty.
He also said he said their is strong global demand for U.S. brands, and that well-diversified alcohol companies have a means of insulating themselves against economic downturns.
"When the stock market goes up, you're drinking Grey Goose, and when the stock market goes down, you're buying Smirnoff," Coughlin said in an interview with Real Money.
Meanwhile, Real Money's Bruce Kamich also noted Wednesday the steady climb in share prices of cigarette-maker Altria Group (MO), which Kamich said appears to be picking up momentum.
"Shares of Altria Group have been going up and up for the past seven years, and this is not smoke and mirrors," Kamich said in a technical analysis of the manufacturer's long-run equity trading.