Cramer's Morning Take: Constellation Brands 4/11/24

Jim Cramer (0:01)

Hey, it's Cramer, and this is my morning take on the market from today's CNBC Investing Club Morning Meeting. It almost feels like the market's got its mind made up, that if the Fed's not going to cut, and if the bond auctions are gonna be bad, then let's book the 9% and go home.

When I've seen this, typically it's short term and short sighted, because we gotta go back to how companies are doing, particularly when we're on earnings season. So that's a short sighted view, but that's the mind of the market right now.

Jeff Marks (0:29)

Absolutely, and I think coming in today, there was fear that PPI would be hotter than expected. It wasn't. I mean, by and large, maybe X food and energy a tick higher, but the headline was a little bit below expectation. So initially you had yields move down, that's what we saw. The market at first stabilized at the open, but then the 10 years, the yields started to move up, stocks fell.

But your point about earnings is a good one, because earnings can buck the rate trend, and I think Constellation Brands is a good example of that today.

Jim Cramer (1:02)

Yeah, I think that I would tell people if you saw selling Constellation Brands and it was actually down, you have to buy it. And the reason why you have to buy it is because having been in this business, the pleases, what are known as the kind of reorders of beer were the highest I can ever recall in the industry of alcohol.

It's doing that well. Now, some of that is because of Bud Light problems there. You're sure they're taking share. This is the kind of thing that is a cash flow machine.

And now we know they have to pay down debt. We know that they spend a lot of money on CapEx and this year's another CapEx year.

Jeff Marks (1:38)

They need to build that capacity to support these share gains.

Jim Cramer (1:41)

Right, and one of the things that I look at is between returning capital and having an opportunity to grow earnings, I always want the company to spend the opportunity to grow earnings. And that's what these guys can do.

Jeff Marks (1:52)

But you know, at the same time, they are doing a little bit of both. I mean, they do buy back stock. They raised the dividend 13% to $1.01. So that's raising the dividend in line with earnings growth. So we want them to do that. And then just real quick, run through the quarter. Revenue up 7%.

EPS $2.26, better than $2.08 expected. Beer was very strong. Wine and spirits, not good, but we figured as much.

Jim Cramer (2:18)

Except that we think that we were hoping actually they trade that portfolio up to probably equity front.

Jeff Marks (2:22)

But guidance was a lot better than expected. I think that's key because this is for the next four quarters, right? So they're on a weird fiscal year schedule. So this is guidance for the next four quarters.

But midpoint 13.65, nicely above estimates at 13.44 implying 13% earnings growth. So again, matching earnings with the dividend. I think people were looking for something more conservative. If conference call starts at 10.30, expect them to talk more about the spring self-shelf reset, which could lead to some nice gains.

Jim Cramer (2:56)

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