Pour Yourself a Glass of Constellation Brands

Should You Satisfy Your Thirst for Investment Profit With Constellation Brands (NYSE: STZ), Molson Coors (NYSE TAP), or Brown Forman (NYSE: BF.B)

Thursday morning, wine and spirits maker Constellation -- it sells brands such as Robert Mondavi, Svedka and Corona --  is poised to report 65 cents a share, up 51% from 2010. Constellation has spent the last five years cutting costs and selling brands that don't fit the "premium-category" wines priced from $5 to $20 a bottle where it wants to cement its lead. During that time it has reduced its debt from $5.3 billion to $3 billion and cut 5,100 employees to a slimmer payroll of 4,300.

Molson Coors does not look to be in such market-beatingly good shape. Its second quarter profit of $1.23, reported on August 2, fell 4.65% below analysts' expectations. And in the last month analysts cut their Molson Coors EPS projections for 2011 -- by 3 cents to $3.55 a share -- and by 7 cents $3.74 a share for 2012.

Brown Forman, maker of premium brands, such as Jack Daniel's, Finlandia, Southern Comfort and Canadian Mist, is doing much better. Brown Forman's adjusted EPS grew 7% in to 81 cents a share in the first quarter of fiscal 2012 on 12.8% revenue growth due to its strong performance in the international market.

So should you buy Brown Forman and avoid the other two? No -- avoid Brown Forman and Molson Coors and consider investing in Constellation. Here's why:

• Constellation: shrinking, profitable company; fairly valued stock. Constellation revenues fell 1% to $3.2 billion in the last year while its net income popped 463% to $485 million yielding a very wide 15.1% profit margin. And its Price-earnings-to-growth ratio (PEG) -- 1.0 is fair value -- is reasonable at 1.00 with a P/E of 6.8 on earnings forecast to grow 6.8% to $2.08 in fiscal 2013.
• Molson Coors: growing, highly profitable company, over-priced stock. Molson Coors revenues are up 7.3% in the last year to $3.3 billion and its net income fell 8.4% to $675 million while it earned an impressive 20.3% net profit margin. But its PEG is an exorbitant 2.09 on a P/E of 11.1 with earnings forecast to grow 5.3% to $3.74 in 2012.
• Brown Forman: growing, profitable company, over-priced priced stock. Brown Forman  revenues are up 5.5% in the last year to $3.5 billion and its net income rose 27.5% to $578 million while it earned a solid 16.5% net profit margin. And its PEG is an over-valued 1.98 on a P/E of 17.8 with earnings forecast to grow 9% to $4.01 in fiscal 2013.

Constellation is the winner in this bunch. Its refocusing is producing profit growth that's likely to exceed its current low valuation. Molson Coors and Brown Forman are solid performers that investors love too much.