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Constellation Brands: Its Strong Fiscal 2Q18 Results

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Part 7
Constellation Brands: Its Strong Fiscal 2Q18 Results PART 7 OF 7

Constellation Brands’ Valuation after Fiscal 2Q18 Results

Impact of fiscal 2Q18 results

Constellation Brands’ (STZ) 12-month forward PE (price-to-earnings) ratio fell 1.4% to 24.0x on October 5, 2017, the day the company announced its fiscal 2Q18 results. As of October 6, 2017, Constellation Brands was trading at a 12-month forward PE ratio of 23.9x. As we saw earlier in this series, Constellation Brands beat analysts’ expectations for fiscal 2Q18 and raised its earnings outlook for fiscal 2018.

Constellation Brands’ Valuation after Fiscal 2Q18 Results

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Valuation of peers

As of October 6, 2017, Constellation Brands’ peers in the alcoholic beverage industry Anheuser-Busch InBev (BUD), Molson Coors Brewing (TAP), and Brown-Forman (BF.B) were trading at 12-month forward PE ratios of 27.8x, 18.2x, and 28.4x, respectively.

Constellation Brands, Anheuser-Busch InBev, and Brown-Forman were trading at higher valuation multiples than the S&P 500 Index (SPX), which was trading at a forward PE ratio of 18.3x as of October 6, 2017.

The 12-month forward PE ratio is computed by dividing a company’s current stock price by its estimated EPS (earnings per share) over the next 12 months. A valuation multiple varies among companies depending on factors such as growth expectations and risk-return profiles.

What analysts expect

For fiscal 2018, analysts expect Constellation Brands’ sales to rise 4.2% to $7.6 billion. They expect the company’s fiscal 2018 adjusted EPS to come in at $8.42, excluding the impact of one-time items. That estimate reflects a year-over-year rise of 24.5%.

A strong demand for the company’s Mexican beer portfolio and its strategic acquisitions in the high-end beer space and premium wine and spirits markets are expected to drive the company’s performance.

For more updates, be sure to visit Market Realist’s Alcoholic Beverages page.

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