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JP Morgan Cuts Opinion on Constellation Brands


JP Morgan cut its investment recommendation on Constellation Brands (STZ) to neutral from overweight.

Analyst Dara Mohsenian cited increased concern that the company's organic growth in the second half will be limited by continued international weakness, decelerating US wine pricing and less seasonal contribution from beer. Although the company keeps its $1.62 fiscal year 2006 (ending February) earnings per share estimates given flexibility with Mondavi synergies, it believes the company needs to post a positive earnings per share surprise, to continue to see multiple expansion after a large run over the last year. The company doesn't expect further valuation upside given the belief that organic growth could slow in the second half. The company noted current valuation well above its historical three-year average.


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