Cannabis has begun to gain wider acceptance over the past years as an increasing number of states have legalized the substance. The Senate Democrats recently introduced a bill, the Cannabis Administration and Opportunity Act, to decriminalize marijuana at the federal level, which could further boost the growth opportunities for companies in this industry.
Rising research and development activities and financial support are expected to drive the global medical cannabis market, which is expected to exhibit an 18.8% CAGR until 2027.
The U.S. medicinal and recreational cannabis sales are expected to reach $33 billion by the end of 2022 and are projected to top $52 billion by 2026. Moreover, the global cannabis market is projected to reach $197.75 billion by 2028, growing at a CAGR of 32%.
Given this backdrop, pot stocks Constellation Brands, Inc. (STZ), Altria Group, Inc. (MO), and Jazz Pharmaceuticals plc (JAZZ) could be ideal investments now.
Constellation Brands, Inc. (STZ)
STZ produces, imports, markets, and sells beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. The company offers its products to wholesale distributors, retailers, on-premise locations, and state alcohol beverage control agencies.
On June 30, STZ announced an agreement with the Sands Family to eliminate its Class B common stock. Each outstanding class B share will be converted into the right to receive one share of Class A plus cash consideration of $64.64 per share. This represents a premium of 26.5%, relative to the closing price of the company's Class A common stock on June 29, 2022.
STZ’s net sales increased 16.6% year-over-year to $2.36 billion in the fiscal first quarter that ended May 31, 2022. Its gross profit grew 12.1% from the year-ago value to $1.26 billion. The company’s operating income increased 987.1% year-over-year to $816.40 million, while the net income attributable to STZ came in at $389.50 million, up 142.9% from the prior-year quarter.
The consensus EPS estimate of $2.76 for the quarter ending August 2022 represents a 15.8% year-over-year improvement. The consensus revenue estimate of $2.50 billion for the same quarter represents a 5.3% increase from the same period last year. STZ also beat the consensus EPS estimates in three of the trailing four quarters.
STZ has gained 8.3% over the past year to close the last trading session at $242.38. It has gained 10.5% over the past nine months.
STZ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
STZ has an A grade in Growth and a B in Sentiment and Quality. It is ranked #13 of 35 stocks in the A-rated Beverages industry.
Beyond what is stated above, we’ve also rated STZ for Value, Momentum, and Stability. Get all the STZ ratings here.
Altria Group, Inc. (MO)
MO manufactures and sells smokable and oral tobacco products in the United States. The company offers cigarettes, primarily under the Marlboro brand. Its tobacco products are sold to wholesalers and large retail organizations.
For the fiscal quarter that ended March 31, 2022, MO’s gross profit increased 3.1% year-over-year to $3.37 billion. Its operating income grew 7.2% from the year-ago value to $2.88 billion. Net earnings for the quarter stood at $1.96 billion, reflecting a 37.9% increase year-over-year. Moreover, its EPS was $1.08, up 40.3% from the prior-year quarter.
Street expects MO’s revenue in the fiscal quarter ending September 2022 to come in at $5.54 billion, indicating a marginal increase year-over-year. Its EPS is expected to improve 7.3% year-over-year to $1.31. The company also surpassed the consensus EPS estimates in three of the four quarters.
MO’s shares have gained 3.8% over the past month to close the last trading session at $43.09.
According to our POWR Ratings, the company has an A grade in Quality. It is ranked #6 of 10 stocks in the A-rated Tobacco industry. To get MO’s ratings for Stability, Sentiment, Growth, Momentum, and Value, click here.
Jazz Pharmaceuticals plc (JAZZ)
Headquartered in Dublin, Ireland, JAZZ is a biopharmaceutical company that identifies, develops, and commercializes pharmaceutical products for various unmet medical needs internationally.
On June 7, JAZZ announced positive results from a phase 2/3 trial that evaluated the intramuscular (IM) administration of Rylaze® in adult and pediatric patients with acute lymphoblastic leukemia (ALL) and lymphoblastic lymphoma (LBL) who have developed hypersensitivity to E.coli-derived asparaginase. This might prove to be strategically beneficial for the company.
On May 4, JAZZ and Sumitomo Pharma Co., Ltd. announced that they had entered into an agreement under which JAZZ acquired the development and commercialization rights for Sumitomo Pharma's investigational DSP-0187, a potent, highly selective oral orexin-2 receptor agonist with potential application for the treatment of certain sleep disorders. This should help JAZZ leverage its expertise in sleep disorders and provide improved patient care.
JAZZ’s total revenues increased 33.9% year-over-year to $813.72 million in the fiscal first quarter of 2022. In the same period, its adjusted net income grew 14.5% from the year-ago value to $261.93 million.
Analysts expect JAZZ’s EPS for the fiscal quarter ended June 2022 to come in at $4.20, indicating an increase of 7.8% year-over-year. The company’s revenue is expected to grow 20.1% year-over-year to $902.51 million in the same period. It surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
Over the past six months, the stock has gained 15.2% to close the last trading session at $157.53. It gained 23.7% year-to-date.
It is no surprise that JAZZ has an overall rating of B, equating to Buy in our POWR Ratings system. The stock also has a B grade in Value and Growth. Out of the 404 stocks in the Biotech industry, JAZZ is ranked #28.
In addition to the POWR Ratings grades I’ve just highlighted, you can see JAZZ’s ratings for Momentum, Quality, Sentiment, and Stability here.
STZ shares were trading at $241.57 per share on Monday afternoon, down $0.81 (-0.33%). Year-to-date, STZ has declined -3.12%, versus a -16.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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