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Vladimir Zernov
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Corona Beer Stock

Constellation Brands Stock Gains Ground As Demand For Beer Stays Strong

Shares of Constellation Brands, the maker of Corona Beer, gained ground after the release of the fiscal first quarter report. Constellation Brands reported revenue of $2.03 billion and an adjusted loss of $2.33 per share, beating analyst estimates on revenue and missing them on earnings.

The company declared a quarterly dividend of $0.76 per share, in line with the previous dividend. At current price levels, the stock yields 1.29%. Constellation Brands raised the dividend in the previous quarter, and the market did not expect another increase in the dividend.

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The report indicated that demand for beer remained strong, and beer depletion growth accelerated. Strong demand allowed the company to generate free cash flow of $602 million.

For the fiscal 2022, the company expects to report adjusted EPS of $10.00 – $10.30, up from the company’s previous estimate of $9.97. Constellation Brands targets fiscal 2022 operating cash flow of $2.4 billion – $2.6 billion and free cash flow of $1.4 billion – $1.5 billion.

It should be noted that Constellation Brands plans approximately $500 million of incremental share repurchases in the second quarter and remains committed to $2.5 billion of share repurchases through fiscal 2023.

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What’s Next For Constellation Brands Stock?

Assuming that the company will be able to reach the midpoint of its adjusted EPS guidance for fiscal 2022, the stock is trading at 23 forward P/E for fiscal 2022 which is not very cheap, even for the current market environment.

However, improved guidance will likely continue to provide support to the company’s shares in the near term. Incremental share repurchases will serve as an additional important catalyst.

Constellation Brands stock has been range-bound for several months, and the recent report may push the stock to the test of the all-time high levels. While the stock is not cheap, its valuation is reasonable, and it remains attractive at current levels.

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