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Vivek Kumar
Constellation Brands

New York-based Fortune 500 international beverage alcohol company Constellation Brands is expected to report its fiscal fourth-quarter earnings of $1.44 per share on Thursday, which represents a year-over-year decline of over 30% from $2.02 per share seen in the same quarter a year ago.

The corona beer marker’s revenue is predicted to decline nearly 3% to around $1.84 billion during the quarter ended February 2021. That comes after the company reported better-than-expected earnings in the previous quarter with profit and revenue far exceeding analysts’ expectations.

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However, it is worth noting that in the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 21%.

Constellation Brands shares, which surged over 15% in 2020 and added another 7% so far this year, traded nearly flat at $235.02 on Wednesday.

Analyst Comments

“We expect investor focus with FQ4 EPS will likely be on Q4 beer depletion growth and March trends, as well as the initial FY22 EPS outlook, which we expect Constellation Brands (STZ) to guide conservatively,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“Our FQ4 EPS estimate is $1.59 (including Canopy equity income losses) is above Eikon consensus of $1.53, or $1.71 excluding Canopy vs. Visible Alpha consensus of $1.72. We expect the market to be most focused on beer depletion trends and margins in Q4, but also more focused on the forward outlook including March depletion trends, and EPS guidance for FY22. We forecast +7.9% y-o-y corporate Constellation Brands (STZ) organic sales growth in FQ4 on a +6.9% prior-year comparison driven by +12.8% organic topline growth in beer, aided by an assumed shipment catch-up in FQ4 (MSe of ~350 bps), recovering the under-shipment in F1H21 due to production limitations at STZ’s Mexican production plants given government-mandated COVID-19 restrictions.”

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Constellation Brands Stock Price Forecast

Fifteen analysts who offered stock ratings for Constellation Brands in the last three months forecast the average price in 12 months of $255.33 with a high forecast of $300.00 and a low forecast of $219.00.

The average price target represents an 8.74% increase from the last price of $234.81. Of those 15 analysts, ten rated “Buy”, five rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $260 with a high of $315 under a bull scenario and $150 under the worst-case scenario. The firm gave an “Overweight” rating on the international beverage alcohol company’s stock.

“We remain Overweight Constellation Brands (STZ) as we see STZ’s valuation as attractive relative to growth peers, and not reflecting re-accelerating and above consensus beer depletions in F2H21, a solid long-term HSD% beer topline growth outlook, and potential beer margin upside relative to conservative STZ guidance,” Morgan Stanley’s Mohsenian added.

“Not only is STZ’s beer business rebounding, but it will also become a larger piece of the corporate mix post the divestiture of low-end wine brands to Gallo. We also expect a return to share repurchases in FY22 with strong debt paydown and EBITDA growth to be another positive catalyst, helping ease historical concerns around capital allocation.”

Several other analysts have also updated their stock outlook. Jefferies raised the stock price target to $300 from $276. JP Morgan upped the price target to $264 from $263. Truist lowered shares from a “buy” rating to a “hold” rating and set a $240 target price. Wells Fargo & Company raised their target price to $265 from $250 and gave the stock an “overweight” rating. UBS Group raised their target price to $256 from $238 and gave the stock a “buy” rating.

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