Constellation Brands’ Quarterly Results Outperform; Shares Plunge

Constellation Brands posted better-than-expected results for the fiscal fourth quarter (ended Feb. 28). However, shares declined 4.6% to close at $224.21 on April 8 as the US producer and marketer of beer, wine, and spirits provided downbeat guidance for fiscal 2022.

Constellation Brands’ (STZ) 4Q adjusted earnings excluding canopy decreased 11% to $1.93 per share on a year-over-year basis but beat Street estimates of $1.55 per share. Net sales jumped 3% to $1.95 billion and surpassed analysts’ expectations of $1.87 billion.

The company’s beer business reported an 18% year-over-year growth in organic net sales, while wine and spirits reported an 8% rise in the quarter. (See Constellation Brands stock analysis on TipRanks)

Constellation Brands’ CFO Garth Hankinson commented, “In fiscal 2022, we expect to continue to have significant capital allocation flexibility, which will enable ongoing progress in returning cash to shareholders while making strategic investments to support long-term growth opportunities.”

For fiscal 2022, the company projects adjusted earnings to be in the range of $9.95-$10.25 per share versus the consensus estimate of $10.44 per share. The outlook assumptions include beer net sales growth of 7%-9% and wine and spirits net sales decline of 22%-24%, among others.

Following the 4Q results, MKM Partners analyst William Kirk maintained a Hold rating and a price target of $219 (2.3% downside potential) on the stock.

Kirk said, “Constellation continues to impress with unrelenting demand for Modelo Especial. Intrinsics (lower calorie and brand authenticity) and Demographics remain very strong for the brand. However, we still are unsure if Seltzer innovation and Wine performance will be enough to drive upside.”

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 5 analysts suggesting a Buy and 3 analysts recommending a Hold. The average analyst price target of $251.33 implies 12.1% upside potential to current levels.

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