Constellation turned in better-than-expected results for its fiscal fourth quarter.
Justin Sullivan/Getty Images
Constellation Brands stock extended its decline on Friday, as investors continued to digest the company’s earnings and downbeat forecast. Analysts, however, rallied to the spirits maker’s defense.
Constellation (ticker: STZ) turned in better-than-expected results for its fiscal fourth quarter on Thursday, but warned that its earnings per share for fiscal 2022 will fall short of consensus expectations. The stock tumbled, in contrast to the post-earnings boost it got with its report in January. It ended Thursday down 4%, and slipped 1.4% to $221.05 in recent Friday trading.
But analysts argue that investors should use the selloff to stock up on Constellation.
Credit Suisse’s Kaumil Gajrawala reiterated an Outperform rating and $260 price target on the stock. The analyst writes that the guidance looks conservative. After all, the company was able to grow shipments “the same high-single digits amidst stay-at-home restrictions, production shutdown, out-of-stocks, and bar closures.” Other catalysts for the shares include improving out-of-stock conditions, a return of on-premise dining, and greater seltzer sales.
Goldman Sachs’ Bonnie Herzog kept the shares on the firm’s Conviction Buy List, calling Constellation her top pick in alcohol and a strong reopening play. “Underlying our conviction includes robust consumer demand for Constellation’s core beer brands, continued momentum and growth opportunities in the high-end segment of the U.S. beer market (where Constellation dominates) and a solid pipeline of innovation across Constellation’s portfolio (including beer, flavored malt beverages, hard seltzer and wine),” she writes. She maintained a price target of $275.
RBC Capital Markets’ Nik Modi kept an Outperform rating and $262 price target on the shares, writing that “the beer business remains healthy.” He expects the company to win the lawsuit brought by Anheuser-Busch InBev (BUD) over its hard seltzer product.
Wells Fargo’s Chris Carey reiterated an Overweight rating and $265 price target. Constellation “has sufficient levers to deliver results ahead of introduced fiscal 2022 guidance and [we] see this creating a beat/raise story through fiscal 2022 on a stock with a valuation to growth amongst the best in staples,” he writes. “That’s a good setup.”
Write to Teresa Rivas at [email protected]
