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.
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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.