Cost savings and a growing focus on high-profit-margin labels is paying off for this leading wine producer. Its earnings in the most-recent quarter beat the consensus estimate and reversed the year-earlier loss.
Recent high-profile acquisitions in B.C. should also add significantly to the company’s premium wine sales and its future earnings.
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ANDREW PELLER LTD. (Toronto symbol ADW.A; www.andrewpeller.com) is Canada’s second-largest producer of wines, after Arterra Wines. The company accounts for 5.9% of the country’s wine sales. Peller’s wineries in Ontario, British Columbia, and Nova Scotia account for 14% of Canada’s wine market.
Through an alliance with hockey star Wayne Gretzky, Peller opened a facility in 2017 that makes wine and whisky under the Gretzky brand. Earlier this year, the company launched a new craft beer called No. 99 Rye Lager. Demand for premium-priced beverages like these remains strong, which should continue to spur company earnings.
In October 2017, Peller acquired three wineries in B.C.: Black Hills Estate, Gray Monk Estate, and Tinhorn Creek. It paid $94.8 million. That price consists of $77.6 million in cash, plus $17.2 million worth of class A common shares.
The new wineries will add between $30 million and $35 million to annual sales over the next five years. As well, they expand the company’s portfolio of premium brands, which currently generate higher profits per litre than regular wines.
Dividend Stocks: High-quality brands help fuel a 4.9% dividend increase
Meanwhile, the company’s sales for the fiscal 2019 fourth quarter, ended March 31, 2019, slipped 0.05%, to $79.78 million from $79.82 million a year earlier. That’s due to stronger competition from cheaper, imported wines and weaker demand in Western Canada.
Peller earned $1.5 million, or $0.03 a share, in the quarter. That beat the consensus estimate of $0.02 a share. A year earlier, it lost $1.7 million, or $0.04 a share. The improved earnings are mainly due to ongoing cost controls and savings from recent acquisitions.
For all of 2019, earnings should reach $0.52 a share. The stock trades at 27.0 times that forecast.
That’s a high multiple, but still reasonable in light of Peller’s high-quality brands. As well, wine consumption continues to expand, particularly among millennials.
The company raised its quarterly dividend by 4.9%, starting with the July 2019 payment. Investors then received $0.05375 a share, up from $0.05125. The new annual rate of $0.215 yields 1.5%.
Peller has paid dividends since 1979, and has raised the annual rate each year for the past seven years.
Dear Patrick, I have been a follower of yours for years and thank you for your wonderful advice over those years. I came across across a stock that I had not seen before and I would like your comments: TSX -DR Medical facilities corporation. As an advance senior, I am very interested in the availability of the medics. Thank you in advance, Vera Creelman
Thanks for your question. We don’t cover Medical Facilities Corp. in any of our newsletters—but we may look at in the future in response to a question from a member of our Inner Circle.
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Dear Patrick, I have been a follower of yours for years and thank you for your wonderful advice over those years. I came across across a stock that I had not seen before and I would like your comments: TSX -DR Medical facilities corporation. As an advance senior, I am very interested in the availability of the medics. Thank you in advance, Vera Creelman
Thanks for your question. We don’t cover Medical Facilities Corp. in any of our newsletters—but we may look at in the future in response to a question from a member of our Inner Circle.