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Drink Up: Alcohol Stocks Are on the Rise

The holidays are here, bringing in lots of holiday "cheer." So raise your glass, because alcohol stocks are on the rise.

Photo By: David Gallagher

In the last three months, Diageo shares are up nearly 9 percent, and ConstellationBrands stock is higher by nearly 22 percent in that same time period. Beer isn't left out either: Anheuser Busch is up more than 3 percent and Molson Coors higher by nearly 11 percent.

Why the run ahead of the holidays? D.A. Davidson food and beverage analyst Tim Ramey thanks increasing restaurant traffic.

"Restaurants have been kind of a swing factor for alcohol consumption. About 25 percent of wine, beer and spirit sales are on-premise. We're seeing a nice recovery in the restaurants and that is helping the alcoholic beverage companies."

Is it a case of holiday spirits? According to Ramey, there isn't normally a correlation between the holidays and alcoholic beverage stock movements, but this year is different. "It was such a dismal performance last year, the comps are easy, and we are seeing better movement through restaurants."

While sales data isn't yet available, Ramey says the anedoctal evidence shows is "there is pretty good movement and a decent holiday season out there. "

Morningstar analyst Phil Gorham says companies also pushed their holiday spirits early this year, with Christmas-themed brandy and whiskey popping up on shelves in October. He notes above-premium liquor brands are the driver of holiday alcohol sales.

Gorham said the fourth quarter is the year's most important for companies like Diageo and Constellation, and added that, to some degree, their financial year depends on it. Last year, Diageo reported 43 percent of its sales came in the final four months of the year, so Gorham estimates that between 35 percent and 38 percent likely came from the fourth quarter.

News on Thursday that Diageo is in early discussions to buy a Turkish spirits company, Mey Icki, is also possibly helping to prop up shares. According to data from IWSR, a liquor-market research firm, Mey Icki's product sales accounted for more than half of the $1.59 billion Turkish spirit market in 2009.

If a deal occurs, Diageo would have an increased presence in emerging markets—a recent area of growth and interest for alcoholic beverages.

Don't raise a glass to continued gains too soon, though. It remains to be seen how long the buzz can continue, and what the hangover effect may be: Analysts are closely watching consumer behavior as sentiment continues to waiver, and unemployment remains high.