Preview: What to Expect From Corona Beer Maker Constellation’s Earnings Next Week

Beer and wine seller Constellation Brands is expected to report its fiscal third-quarter earnings of $2.82 per share, which represents year-over-year growth of nearly 9% from $3.09 per share seen in the same quarter a year ago.

The New York-based Fortune 500 international beverage alcohol company revenue is predicted to slump more than 6% to around $2.28 billion. The company has been able to beat earnings per share (EPS) estimates twice in the last four quarters and revenue in all four.

According to ZACKS Research, for the full-year earnings to be $10.01 per share and revenue $8.64 billion.

Better-than-expected earnings results, which will be announced on Thursday, January 6 before the bell, could help the stock scale to a fresh record high. Constellation Brands stock hit a record high of $245.355 on Monday. It soared over 12% so far this year.

Analyst Comments

“While Constellation Brands historically made its bones as a winery and distillery, we now view the firm as one of the most stellar brewers across our global coverage. After parlaying AB InBev’s antitrust quandary (as it sought to acquire Mexican brewer Grupo Modelo) into exclusive U.S. ownership rights to brands like Corona and Modelo, we see the firm’s overall Mexican beer portfolio as auspiciously situated at the confluence of unwavering secular and demographic trends. With an enviable growth profile and best of breed margins, we have confidence that the beer business can thrive even amid an evolving industry landscape,” noted Jaime M. Katz, Senior Equity Analyst at Morningstar.

“The firm’s outlook is not completely rosy, particularly with its wine and spirits business in flux. It has divested lower-quality brands as it places more intentionality behind its “high growth, high margin “long-term strategy, but the remaining brands (such as Meiomi, Kim Crawford, Svedka vodka, and High West craft whiskey) will still face rife competition. Constellation’s foray into explosive-growth categories like hard seltzer are also demanding nontrivial investment, given the competitive intensity and brand equity already built up by the incumbents. Nevertheless, we believe the experience of the management team will allow the firm to navigate these risks.”

Constellation Brands Stock Price Forecast

Fourteen analysts who offered stock ratings for Constellation Brands in the last three months forecast the average price in 12 months of $260.92 with a high forecast of $305.00 and a low forecast of $213.00.

The average price target represents a 6.48% change from the last price of $245.05. Of those 14 analysts, ten rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $254 with a high of $302 under a bull scenario and $147 under the worst-case scenario. The firm gave an “Overweight” rating on the alcohol company’s stock.

“Robust Beer Depletion Growth: We expect a re-acceleration to +HSD% beer depletions growth in FY22 and beyond post negative COVID impacts in FY21. Our expected improvement is driven by the resolution of beer out-of-stocks, improving shelf-space and market share trends for Constellation Brands (STZ), as well as distribution expansion,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“Solid Long-Term Beer Fundamentals: 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 ~7.5% 3-year STZ corporate organic sales forecast is above the ~4% growth at higher valued beverage peers.”

Several other analysts have also updated their stock outlook. Barclays cut the target price to $257 from $260. UBS raised the price target to $270 from $264. Jefferies lifted the target price to $305 from $300. Citigroup slashed the price target to $239 from $257.

Technical analysis also suggests it is good to buy now as 50-day Moving Average and 50-200-day MACD Oscillator signals a strong buying opportunity.

Check out FX Empire’s earnings calendar