Constellation Brands (STZ) Earnings Preview, Goldman Sachs Sees and Opportunity
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Goldman Sachs analyst Bonnie Herzog reiterated a Buy rating and $275.00 price target on Conviction List name, Constellation Brands (NYSE: STZ) ahead of F4Q21 results on Apr 8th. The buyside has relatively low expectations for the quarter and management seems to have good visibility on the quarter based on upbeat meetings with STZ’s CFO in early Feb.
The analyst stated "We expect an FQ4 EPS beat driven by strong beer topline growth and better-than-expected beer margins – and believe this should be a positive catalyst for the stock. Digging deeper, we expect STZ’s FQ4 topline to be driven by +8.0% beer depletions/+13.5% beer shipments (reflecting one less shipping day) vs lower investor expectations for beer depletions and Nielsen tracked channel beer vol growth of +10.9%. On margins, we conservatively estimate that STZ’s FQ4 beer op margin contracted -240bps y/y to 36.9%, although we note this implies an FY21 beer op margin of 41.1%, which is above the high end of mgmt’s FY21 guidance of 40-41%. Importantly, we view much of the FQ4 beer margin pressure as transitory, driven by a shift in marketing spend from F1H to F2H due to Covid, higher freight/logistics costs from expediting shipments into the US to increase inventory levels, increased headcount in Obregon ahead of the 5M hl capacity expansion and a shift of brewery maintenance from FQ3 into FQ4."
Shares of Constellation Brands closed at $230.28 yesterday.
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