Vivek Kumar
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Constellation brands

New York-based Fortune 500 international beverage alcohol company Constellation Brands’ shares hit a record high on Thursday after the company reported better-than-expected earnings in the fiscal third quarter of 2021.

The corona beer marker reported a profit of $3.09 per share in the third quarter ended November 30, 2020, beating the Wall Street estimate of $2.40 per share, up from $2.14 per share profit seen in the same period a year ago. Constellation Brands posted revenues rose 22% to $2.44 billion, beating the market expectations by over 7%.

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Constellation Brands (STZ) delivered strong 44% EPS growth driven by robust beer shipments (+27%) as manufacturing supply comes online and the company works to address inventory out of stocks at retail. Underlying consumer demand also improved, with depletions up 12% in the quarter. Guidance comes up, while the company also introduced a new $2 billion share buyback authorization,” said Vivien Azer, equity analyst at Cowen and company.

The producer and marketer of beer, wine, and spirits forecast 2021 EPS on a comparable basis of between $9.8 and $10.05 per share. That was higher than the market expectations of $9.44. The company expects fiscal 2021 net beer sales growth as much as 9% but forecasts net sales of wine and spirits to decline by 9% to 11%.

Following the earnings result, Constellation Brands shares soared as much as 7.6% to record high of $240.76 on Thursday. However, the stock rose 15.4% in 2020.

“We plan to raise our $226 fair value estimate by a mid-single-digit percentage to reflect time value and stronger near-term beer shipments as the firm continues to rebuild the inventory deficit caused by the production shutdown in Mexico last March. The shares now appear fairly valued to us, but the quality in the business remains as clear as ever and we’d be happy long-term holders,” said Nicholas Johnson, equity analyst at Morningstar.

Constellation Brands Stock Price Forecast

Morgan Stanley gave a base target price of $260 with a high of $302 under a bull scenario and $154 under the worst-case scenario. The firm currently has an “Overweight” rating on the beverage alcohol company’s stock.

Several other analysts have also recently upgraded their outlook. Citigroup raised the price target to $244 from $220. Cowen and company upped the price objective to $275 from $240. Jefferies increased the stock price forecast to $276 from $273. Evercore ISI raised the target price to $275 from $270. RBC upped the price objective to $262 from $243.

Thirteen analysts who offered stock ratings for Constellation Brands in the last three months forecast the average price in 12 months at $228.17 with a high forecast of $273.00 and a low forecast of $154.00.

The average price target represents a -0.31% decrease from the last price of $228.87. From those 13 equity analysts, nine rated “Buy, three rated “Hold” and one rated “Sell”, according to Tipranks.


Analyst Comments

“We expect a re-acceleration to +HSD% beer depletions growth in 2H21 after COVID-related impacts drove a slowdown to +MSD% in 1H21. Our expected improvement is driven by the resolution of beer out-of-stocks, improving shelf-space and market share trends for Constellation Brands (STZ) high-velocity products, as well as innovation contribution (Corona Hard Seltzer),” said Ricky Goldwasser, equity analyst at Morgan Stanley.

“Our robust +HSD% LT beer topline CAGR is driven by favourable sub-category positioning (high-end beer), advantageous demographics (skew to Hispanics), solid pricing, and innovation. Our ~6% 3-year STZ corporate organic sales forecast is above the ~4% growth at beverage peers.”

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