Vladimir Zernov
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Constellation Brands

Constellation Brands Video 20.05.21.

Constellation Brands Stock Pulls Back But Stays Close To All-Time Highs

Shares of Corona beer maker Constellation Brands made an attempt to settle above the $245 level at the beginning of this month but lost momentum and pulled back together with S&P 500.

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The company reported its quarterly results back in April, and the stock found itself under pressure right after the release of the report. The company’s earnings guidance was below expectations, but traders managed to shrug off worries about the conservative guidance.

Analysts estimates have been mostly stable in recent weeks, and the company is expected to report earnings of $10.1 per share in the current fiscal year and $11.75 per share in the next fiscal year.

Currently, the stock is trading at 20 forward P/E which is a decent valuation level for the current market environment, but the stock’s ability to gain additional upside momentum will depend on whether earnings estimates will begin to move higher.


What’s Next For Constellation Brands?

The key question for investors is whether the continued rebound of the economy will increase demand for the company’s beer, wine and spirits, pushing analyst earnings estimates higher.

While 20 forward P/E looks like a reasonable valuation, it is not extremely cheap, and the company will have to show robust growth to justify multiple expansion that will push its shares to higher levels.

At the same time, it should be noted that rotation from high-flying tech stocks into other market segments may provide some help to Constellation Brands shares as the beverages industry serves as the defensive segment at times of market volatility.

I’d also add that the company’s peers in the beverages segment often enjoy higher multiples so the market looks ready to pay a premium when it sees growth. In this light, Constellation Brands shares should have a chance to gain additional upside momentum if the company outperforms its previous earnings guidance of $9.97 per share (on a comparable basis).

For a look at all of today’s economic events, check out our economic calendar.

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