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Citi sees a modest positive catalyst for Constellation Brands

Published 02/17/2023, 08:09 AM
Updated 02/17/2023, 08:17 AM
© Reuters.  Citi sees a modest positive catalyst for Constellation Brands

© Reuters. Citi sees a modest positive catalyst for Constellation Brands

By Sam Boughedda

In a note on US beverages and household products on Friday, Citi analysts said that ahead of the CAGNY conference, they expect investor focus to be centered on recently provided FY2023 guidance ranges and any potential sources of upside/downside.

The firm sees three overarching debates, including the ability of CPG companies to sustain elevated organic sales growth, the magnitude of gross margin and EPS recovery with the moderation of commodity headwinds, and sector valuations with increased market optimism around a soft landing.

While Citi doesn't expect significant stock moves, they see a modest positive catalyst at Buy-rated Constellation Brands (NYSE:STZ).

"We expect the largest potential catalyst at STZ, given the company last reported in January and its fiscal year 2023 ends on February 28th," wrote the analysts. "After the disappointment of FQ3 beer depletions, we expect STZ's tone to be encouraging on the topline improvement in beer as some of the temporary issues have moderated (CA weather, incremental retail pricing, bodegas weakness). Thus, we see a modest positive catalyst for STZ."

The firm also expects positive commentary on longer-term topline trends at other Buy-rated names, such as Colgate-Palmolive (NYSE:CL) (Citi's top pick), Procter & Gamble (NYSE:PG), and Coca-Cola (NYSE:KO).

The analysts also said the firm sees compelling long-term growth opportunities in Monster Beverage (NASDAQ:MNST) and STZ.

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