Shares of Beer Giant Constellation Plunge on Sales, Earnings Fall

Constellation Brands’ stock dropped over 3% on Thursday after the Fortune 500 beverage alcohol company reported lower earnings and sales in its fiscal third quarter, albeit above market expectations.

The corona beer marker reported quarterly adjusted earnings of $3.12​​ per share for the quarter ended in November, beating the Wall Street consensus of $2.82 per share. The company’s revenue plunged nearly 5% to $2.32 billion from a year ago. That was above the market expectations of $2.28 billion.

The beer, wine and spirits maker said its net income declined to $470.8 million, or $2.48 per Class A common share down from $1.28 billion, or $6.68 a share in the year ago. The beer giant forecasts a full-year loss of 25 cents to 10 cents per share; increases comparable basis EPS outlook to $10.50- $10.65.

Constellation Brands shares fell over 3% to $244.79 on Thursday. The stock rose more than 14% in 2021.

Analyst Comments

“Strong beer demand Constellation’s key driver, despite a weaker than expected FY23 beer margin outlook,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“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. 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 Modelo Especial brand momentum. Our ~7.5% 3-year STZ corporate organic sales forecast is above the ~4% growth at higher valued beverage peers.”

Constellation Brands Stock Price Forecast

Seventeen analysts who offered stock ratings for Constellation Brands in the last three months forecast the average price in 12 months of $275.81 with a high forecast of $316.00 and a low forecast of $226.00.

The average price target represents a 12.67% change from the last price of $244.79. From those 17 analysts, 13 rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $299 with a high of $336 under a bull scenario and $167 under the worst-case scenario. The firm gave an “Overweight” rating on the alcohol company’s stock.

Several other analysts have also updated their stock outlook. Guggenheim raised the target price to $242 from $236. Credit Suisse lifted the price objective to $285 from $280. Citigroup upped the price target to $265 from $239. JPMorgan cut the target price to $278 from $283.

Technical analysis also suggests it is good to buy now as 100-day Moving Average and 50-200-day MACD Oscillator signals a buying opportunity.

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