Constellation Brands (STZ) Falls Despite Earnings, Revenue Beat - Analysts Weigh In

June 30, 2022 12:42 PM EDT
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Price: $243.73 +1.62%

Rating Summary:
    23 Buy, 12 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 8 | Down: 40 | New: 22
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Constellation Brands (NYSE: STZ) reported first-quarter earnings before the bell Thursday.

The company reported earnings of $2.66 per share, $0.13 better than the analyst estimate of $2.53. Revenue also beat expectations, coming in at $2.54 billion versus the consensus estimate of $2.16 billion.

Constellation Brands sees fiscal 2023 earnings per share between $11.20 to $11.50 versus the consensus of $11.06.

Despite an initial rise premarket, shares are down more than 3% at the time of writing.

Wall Street analysts had their say on the report following its release:

"STZ reported a very strong start to the year with FQ1 results that handily beat our/cons estimates both on the top/bottom lines. Investor expectations going into the quarter were high, and STZ's results easily lived up to those expectations. Despite the big Q1 beat, mgmt reaffirmed guidance we believe to be conservative given the outsized beer results in Q1 puts our/cons FY23 estimates well above full year guidance," said Goldman Sachs analyst Bonnie Herzog.

Barclays analyst Lauren Lieberman says the company has typically been conservative, but the outlook implies a “very significant deceleration.”

“The high end of the guidance range for sales could suggest low single digit shipments (if 1Q’s price/mix holds) for the balance of the year and on the bottom line, the ~20c benefit from this quarter’s beat and the stronger share repurchase is nowhere to be found,” she added.

UBS analyst Peter Grom, who has a Buy rating and $270 price target on the stock, said the report was "Slightly Positive/Neutral."

"Against that backdrop, we think the quarter largely played out as expected as beer depletion growth came in stronger than expected (with most of the sales upside coming from beer shipments ahead of depletions) and more than offset a slight gross margin miss for the quarter. While some may be disappointed that guidance didn't move higher this morning (particularly given the upside in the quarter and a lower share count), at this point we believe this is simply a prudent approach from management given the evolving consumer landscape, rather than a sign that trends are beginning to deteriorate," wrote Grom.

Nik Modi at RBC Capital currently has an Outperform rating and a $300 per share price target on the stock. He told investors that "through a combination of share gains, contribution from innovation, distribution wins and narrowing price gaps between domestic premium and Corona/Modelo Especial, we continue to believe STZ can compound its beer top line at 7-9% rate over the next 3 years (with a bias to the upside). While we believe margins also have upside, we think STZ will focus on a top-line driven value creation model (investing heavily behind its brands)."

Evercore ISI analyst Robert Ottenstei also has an Outperform rating on the stock, with a $285 price target. He said beer shipments drove quarter upside, and there was robust import momentum. "Beer OI beat by 11.8% at $763M vs. $682M consensus, while Wine & Spirits OI missed consensus by 16.9% at $91M vs. $109M consensus, driven by increased cost pressures as shipment volumes of +1.5% were ahead of Street -3.4%. Beer depletions +8.7% vs. +7.4% consensus as import momentum remained strong, with Modelo Especial +15%, Corona Extra +4%, and Pacifico +21%. Beer shipments, which drive the P&L."

Finally, Morgan Stanley analyst Dara Mohsenian, who has an Overweight rating and $298 price target on the stock, said: "STZ reported Q1 EPS of $2.90, above the $2.70 consensus, driven by beer topline and margin upside, offset partially by wine margin (profit) downside, and maintained FY EPS guidance, despite an incremental repurchase benefit worth 1.3% to shares, which we think is offset by higher digital spend investments in the corporate line."

By Sam Boughedda

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