Constellations (STZ) stocks saw an unprecedented surge on Thursday to record a 7% gain. This is an all-time high for the beverage company that owns Corona. The company also sells other beverages including Mexican brews such as Pacifico and Modelo. And that is not all. Constellations (STZ) also owns the Robert Mondavi winery and the SVEDKA Vodka. The surge in stock prices was occasioned by the company’s quarterly performance report that confirmed sales and profits for the three months had gone up above the forecasts. In addition to this, performance outlook for the remainder of the year has remained very robust.
The surge in stock prices comes as the fear of trade protectionism from the US under the Trump administration continues to calm down. Even more significantly, this is a remarkable turnaround for Constellations (STZ) whose stock prices crumbled after the election of Donald Trump as US President in November. The slump was occasioned by the fear of tough trade tariffs targeting Mexican companies and also the proposal by the President to build a wall along the Mexico-US border. The company shares dropped 15% in the days between the election and the end of December and some days in January.
The slump was a sharp contrast to the rest of the market that saw significant gains. Wall Street termed this as the Trump Bump and it was a result of the promise of increased deregulation, stimulus plans, and immediate tax reforms under the new Trump administration. However, in a complete change of trajectory, Constellations (STZ) is doing well. The company’s CEO, Robert Sands, said that the business environment is looking up at the moment and the surge in stock prices plus the increase in sales and profits are an indication of this.
It appears as if the Trump factor and the role it played in the slump is now gone. Sands confirmed that beer sales in the fourth quarter rose 11% and operating profits from the brewery departments grew by 21%. Even though the anti-Mexico talk has subsided, it wouldn’t be a surprise if indeed the debate is reignited once more. In addition to this, the vigor in which Trump and his team were advocating for a border wall seems to have died down a bit. Homeland Security Secretary, John Kelly, told the senate committee on Wednesday that it was unlikely that the administration will build a wall from sea to shining sea”.
And not only that, Constellations (STZ) is banking on the fact that anticipated tough trade tariffs that were part of the promises made by Trump appear to be far down the road at the moment. As the year progresses, the company will definitely be looking to maintain this momentum and put behind the woes witnessed after the election. It is still not yet clear how Trump intends to change the balance of trade between Mexico and the US. However, companies like Constellations (STZ) remain hopeful that the trade protectionism is no longer on the list of priorities for the POTUS.
