Market News

Anheuser-Busch Sues Constellation Brands for Breach of Contract — Report

According to a report published by Reuters, multinational drink and brewing firm Anheuser-Busch InBev SA’s (BUD) Mexican arm has filed a lawsuit against New York-based alcohol company Constellation Brands (STZ) accusing it of breaching their deal for the second time by selling Mexican beers in the U.S.

Headquartered in Belgium, Anheuser-Busch manufactures and sells alcoholic and non-alcoholic beverages across the world. Its portfolio comprises around 630 beer brands in 150 nations. These brands include Corona, Budweiser, Castle, Skol, Hoegaarden, Stella Artois, Bud Light and Antarctica, among others.

Constellation produces and sells spirits, wine and beer in the U.S., Italy, New Zealand and Mexico. Its brands include Pacifico, Modelo Negra, Modelo Especial, Meiomi, Kim Crawford, Robert Mondavi, High West Whiskey, Casa Noble Tequila, The Prisoner and more.

Anheuser-Busch’s subsidiary Grupo Modelo filed the lawsuit on August 31 in the U.S. district court of the southern district of New York over Constellation’s launch of two Modelo Reserva beers, one aged on tequila and another on bourbon barrels. (See Anheuser-Busch stock chart on TipRanks)

The court document says one breaches Constellation’s sub-license to sell Mexican-style beer as bourbon is not related to Mexico in any way. Furthermore, the sub-license prohibits this type of spirit branding. The document also said that the other breaches the Mexican and the U.S. laws that limit the use of the word tequila.

In response, Constellation said it was in complete compliance with the terms of the sub-license and that Grupo Modelo’s claims were without merit. Meanwhile, Anheuser-Busch said that Mexico’s Tequila Regulatory Council (CRT) has asked Constellation to stop using the word tequila in marketing.

While Constellation’s shares closed 1.8% higher at $214.91 on Wednesday, shares of Anheuser-Busch lost 1.9% in extended trade and closed at $61.11. (See Constellation stock chart on TipRanks)

Two months ago, Credit Suisse analyst Kaumil Gajrawala maintained a Buy rating on Constellation and raised the price target to $275 from $260 (upside potential of 28%) after the company announced the financial results for the fiscal first quarter ended May 31.

The analyst said, “Constellation overcame supply issues and other one-time interruptions to report a solid quarter.”

Overall, the stock has a Strong Buy consensus rating based on 10 Buys and 2 Holds. The average Constellation Brands price target of $269.92 implies 25.6% upside potential. The company’s shares have gained 14.3% over the past year.

According to TipRanks’ Smart Score rating system, Constellation scores a 9 out of 10, suggesting that the stock is likely to outperform market averages.

Last month, Kepler Capital analyst Richard Withagen reiterated a Buy rating on Anheuser-Busch with a price target of $90.8 (upside potential of 45.8%). The analyst expects the company to report earnings per share (EPS) of $0 in the third quarter.

Overall, the stock has a Moderate Buy consensus rating based on 3 Buys and 1 Sell. The average Anheuser-Busch InBev price target of $81.47 implies 30.8% upside potential. Shares of the company have lost 10.7% year-to-date.

Related News:
TerrAscend to Buy Premium Cannabis Operator Gage Growth
ATS Acquires NCC Automated Systems for $40M
Komatsu Rallies After Second Cathie Wood ETF Buys Stock

Tired of arriving late to the Big Returns Party?​
Most investors don’t have major gainers like TSLA or NVDA on their radar from the start.
The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype.
​​For the past decade, we have developed and perfected technology designed to help private investors, just like you, find the best opportunities, with the greatest upside potential, in any financial climate.​
Learn More
Videos
Videos

Latest News Feed