Constellation Brands Struggles While Analysts Remain Optimistic
With a market cap of $43.5 billion, Victor, New York-based Constellation Brands, Inc. (STZ) is a major player in the production and marketing of beer, wine, and spirits. The company showcases a broad range of well-known brands including Corona, Modelo Especial, Kim Crawford, Meiomi, and SVEDKA Vodka, serving wholesale distributors, retailers, and on-premise outlets.
Recent Performance Shows Challenges
Over the past 52 weeks, Constellation Brands’ shares have not kept pace with the broader market. While STZ has seen a slight increase, the S&P 500 Index ($SPX) has surged by 31%. In 2024, STZ’s shares are slightly down, compared to the SPX’s impressive 25.2% year-to-date increase.
Consumer Staples Index Comparison
When compared to the Consumer Staples Select Sector SPDR Fund (XLP), which has risen 16.7% in the past year and 13.6% year-to-date, STZ’s performance appears even weaker.
Mixed Results from Recent Earnings
Despite posting a better-than-expected Q2 adjusted EPS of $4.32, shares of Constellation Brands fell 4.7% on Oct. 3 after net sales of $2.9 billion did not meet expectations. The wine and spirits division reported a notable 12% decrease in sales to $388.7 million, sales volume dropped by 9.8%, and a substantial $2.25 billion goodwill impairment raised concerns about future challenges. Fiscal 2025 guidance indicated a forecasted decline between 4%-6% in wine and spirits sales and a significant 16%-18% decrease in segment operating income, negatively impacting the company’s growth prospects despite a growing beer segment.
Future Outlook and Analyst Consensus
Looking to the current fiscal year ending in February 2025, analysts predict STZ’s EPS will grow by 12.5% year-over-year, reaching $13.57. The company has a solid recent track record, having exceeded consensus estimates in the last four quarters.
Out of 19 analysts covering the stock, the consensus rating remains a “Strong Buy,” based on 14 “Strong Buy” ratings, one “Moderate Buy,” and four “Holds.” This rating has softened since three months ago, when 16 “Strong Buy” ratings were given.
Analysts Set Price Targets
On Nov. 19, Robert Ottenstein of Evercore ISI reaffirmed a “Buy” rating for Constellation Brands, assigning a price target of $300. The average price target of $292 suggests a 21.8% upside from STZ’s current prices, while the highest target of $325 indicates a potential increase of 35.6% from current levels.
On the date of publication, Sohini Mondal did not hold any positions in the securities mentioned in this article. All information and data in this article are for informational purposes only. For further details, please see the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
