Constellation Brands (NYSE: NYSE:STZ) has received a confirmation of a Buy rating and a $305.00 price target from Citi.
The company surpassed the expected fiscal second-quarter earnings per share (EPS) with reported figures of $4.32, beating the consensus estimate of $4.08 and Citi's projection of $4.07.
The better-than-anticipated results were attributed to robust beer segment revenue growth, marked by a 4.6% increase in shipments. However, beer depletions grew by 2.4%, which fell short of the expected range of approximately 3-4%.
Despite the shortfall in beer depletions compared to the Visible Alpha consensus of 3.7% and Citi's 3.0% forecast, Constellation Brands' beer margins were notably higher than anticipated.
This offset the revenue miss in the Wine & Spirits (W&S) segment, although the W&S segment still managed to exceed profit expectations. Constellation Brands has reiterated its full-year fiscal 2025 guidance, which was previously updated on September 3, 2023.
The guidance includes an expected year-over-year beer topline growth of 6-8%, aligning with the consensus of 7.0%. Beer operating income (OI) is projected to grow by 11-12%, which is consistent with the consensus estimate of an 11.4% increase, implying a beer operating margin (OM) around 39.5%. The forecast for the Wine & Spirits segment is less optimistic, with expected topline declines of 6.0% to 4.0%, slightly better than Citi's and consensus estimates of -5.8% and -5.0%, respectively.
Wine & Spirits operating income is anticipated to decrease by 18% to 16%, compared to a consensus estimate of a 16.7% decline. The EPS guidance remains at $13.60 to $13.80, closely matching Citi's and the consensus estimates of $13.65 and $13.71, respectively.
In other recent news, Constellation Brands has seen a flurry of activity with notable earnings results and strategic moves. The company's recent earnings per share exceeded expectations by 8%, primarily driven by a significant margin increase in the beer division and effective cost management in the wine and spirits division. Barclays maintained an overweight rating on Constellation Brands, with a steady price target of $309, reflecting confidence in the company's performance.
Constellation Brands also declared a quarterly cash dividend, a move that signals its financial health and commitment to shareholder returns. Meanwhile, several financial firms adjusted their outlook on Constellation Brands. Roth/MKM reduced the stock's price target to $298 but retained a Buy rating. Deutsche Bank lowered its price target from $259 to $256, maintaining a Hold rating, following the company's revised sales forecasts for its beer and wine & spirits segments.
Jefferies revised its price target for Constellation Brands to $310, down from the previous $311, endorsing a Buy rating for the stock despite a tempered beer sales outlook. Lastly, Constellation Brands announced the resignation of board member Judy A. Schmeling.
InvestingPro Insights
Constellation Brands' recent performance and future outlook can be further illuminated by data from InvestingPro. The company's market capitalization stands at $46.58 billion, reflecting its significant presence in the alcoholic beverage industry. With a P/E ratio of 18.96, STZ is trading at a relatively moderate valuation compared to some of its peers.
InvestingPro Tips highlight that Constellation Brands has raised its dividend for 9 consecutive years, demonstrating a commitment to shareholder returns that aligns with the company's solid financial performance. This is further supported by the fact that STZ's liquid assets exceed its short-term obligations, indicating a strong financial position.
The company's profitability over the last twelve months, as noted by InvestingPro, corroborates the positive earnings report mentioned in the article. Additionally, analysts predict continued profitability for the year ahead, which is consistent with the company's reiterated guidance for fiscal 2025.
It's worth noting that InvestingPro offers 5 additional tips for Constellation Brands, providing investors with a more comprehensive analysis of the company's financial health and market position. These insights could be particularly valuable given the mixed signals in the recent earnings report, such as the beer depletions miss contrasted with higher-than-expected beer margins.
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