On Thursday, CFRA, a notable financial research firm, adjusted its price target on shares of Constellation Brands (NYSE:STZ), increasing it from $245.00 to $270.00 while retaining a Hold rating on the stock. The revision follows the company's recent earnings report, which surpassed expectations.
Constellation Brands, recognized for its portfolio of beer brands including Modelo, Corona, and Pacifico, reported adjusted earnings per share (EPS) of $2.26 for the February quarter, a significant increase from $1.98 in the previous year and above the consensus estimate of $2.10.
This performance boost was attributed to a robust top line and a favorable tax rate. Revenue grew by 7% to reach $2.14 billion, exceeding consensus by $40 million, and gross margin widened by 50 basis points to 48.6%.
The company has also provided an optimistic outlook for the fiscal year 2025, with adjusted EPS guidance ranging from $13.50 to $13.80. This forecast is not only above the current consensus of $13.43 but also suggests a growth of 12-14% from the $12.06 earned in 2023.
Despite the positive earnings beat and forward guidance, CFRA expressed concerns regarding the durability of Constellation Brands' sales growth. The analyst noted that the growth has been largely fueled by a consumer shift from domestic to imported beer brands.
In light of the recent financial results and future projections, CFRA has raised its adjusted EPS estimates for Constellation Brands to $13.70 from $13.30 for fiscal year 2025 and to $15.00 from $14.75 for fiscal year 2026.
The new stock price target of $270 is set with a forward P/E of 18.0x for fiscal year 2026, which is a discount to the company's five-year mean forward P/E of 21.7x. Despite the target increase, CFRA's stance remains cautious based on valuation concerns.
InvestingPro Insights
In the wake of CFRA's updated price target and outlook on Constellation Brands, current data from InvestingPro provides additional context for investors considering the company's stock. As of the latest metrics, Constellation Brands boasts a robust market capitalization of $48.87 billion, indicative of its significant presence in the beverage industry.
The company's commitment to shareholder returns is evident through its consistent dividend growth, having raised its dividend for 9 consecutive years, showcasing a dividend yield of 1.34% as of the last dividend ex-date on February 7, 2024.
InvestingPro Tips highlight that Constellation Brands is expected to see net income growth this year, which aligns with the company's optimistic EPS guidance for fiscal year 2025. Moreover, the company's stock is noted for trading with low price volatility, which may appeal to investors seeking stability in their portfolio.
Still, investors should be aware that 5 analysts have revised their earnings estimates downwards for the upcoming period, which may warrant closer scrutiny of future earnings reports.
For investors looking for a deeper dive into Constellation Brands' financials and future prospects, there are additional InvestingPro Tips available. By visiting https://www.investing.com/pro/STZ, investors can access these insights and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of information to guide investment decisions.
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