Alcoholic beverage marketer Constellation Brands (NYSE:STZ) is in the news today, and STZ stock is climbing about 4.5% after the company announced an agreement with activist investor Elliott Management. Elliott’s CEO is the well-respected billionaire investor Paul Singer.
Singer’s investment strategy is often described as “adversarial but immensely profitable.”
Details About the Agreement
Under the deal between Constellation and Elliott, Constellation added two independent members to its board. Specifically, the company appointed William Giles, the former CFO of AutoZone (NYSE:AZO) and Mondolez (NASDAQ:MDLZ) CFO Luca Zaramella to the panel.
Additionally, STZ committed to refraining from adding more than one additional member to its board for the next year, and the new board member would have to be independent and be “a current or former chief executive officer of a publicly-traded company. ”
Moreover, “Constellation… entered into Information Sharing and Cooperation Agreements with Elliott,” including provisions related to voting and “mutual non-disparagement.”
Further Information About STZ
On June 30, Constellation reported better-than-expected first-quarter results, as its earnings per share, excluding certain items, came in at $2.91, versus analysts’ average estimate of $2.83, while it reported sales of $2.51 billion, slightly above analysts’ mean estimate. The company’s top line climbed 6.4% versus the same period a year earlier.
Commenting on the company’s outlook in a statement today, Elliott Senior Portfolio Manager Marc Steinberg and Portfolio Manager Michael Goldberg. said:
“We believe the company’s meaningful growth potential, powered by its premier Mexican beer portfolio, is not currently reflected in the company’s stock price, and represents a significant amount of value that can be created from here.”
Steinberg and Goldberg added that they are pleased with Constellation’s strategy at this point.
STZ Stock: What Investors Should Watch Going Forward
Investors should try to determine the extent to which the company’s new board members are improving its financial results, strategy and outlook.
STZ stock is up about 9% in the last month and 16% year-to-date (YTD).
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
