Jefferies upgrades Constellation Brands on signs that headwinds are easing

Investing.com -- Jefferies upgraded Constellation Brands (NYSE: STZ) to Buy from Hold, as it raised stock’s price target to $205. Analysts say the Corona brewer’s valuation looks too low as pressure on its core U.S. Hispanic customer base shows signs of stabilising.

Shares have fallen sharply as beer volumes slipped amid fewer drinking occasions for Hispanic consumers, who account for about half of Constellation’s beer sales.

The stock was up 1.6% at $175.10 in pre‑market trading. It closed at $172.27 on Friday.

We see 12.5x P/E as too cheap and think the multiple expands to 15x as we distance ourselves from this moment, Jefferies analysts wrote adding that “the issues are real, but not forever.”

Constellation last week reported a 4.2% drop in first‑quarter organic revenue and earnings of $3.22 a share, missing Wall Street estimates as higher advertising spending and lower beer shipments offset modest price increases.

Guidance for the year was unchanged.

Jefferies expects revenue and profit growth to accelerate in the second half of the fiscal year as year‑ago comparisons ease and margins improve, even without an immediate rebound in consumer sentiment.

A broader recovery, it said, should follow once economic pressures on lower‑income drinkers subside.

At 12.5 times Jefferies’ fiscal‑2026 earnings forecast, the shares trade well below their five‑year average multiple of about 18.

Expanding that valuation to 15 times would lift the stock to $205, roughly 17% above Monday’s pre‑market level.

The firm also pointed to improving profitability in Constellation’s wine and spirits unit and strong free cash flow, which it said supports ongoing share buybacks.

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