Constellation Brands’ Valuation before Q2 2019 Results

PE multiple down since first-quarter results

Constellation Brands’ (STZ) 12-month forward PE multiple has declined 4.9% since the announcement in June of its results for the first quarter of fiscal 2019.[1. Fiscal Q1 2019 ended on May 31, 2018.] As we’ve already seen in this series, adjusted EPS missed analysts’ expectations and fell year-over-year in the first quarter.

Constellation Brands’ Valuation before Q2 2019 Results

Comparison with peers

As of September 27, Constellation Brands was trading at a 12-month forward PE of 22.5x, which is higher than the valuation multiples of 19.0x and 12.5x for Anheuser-Busch InBev (BUD) and Molson Coors Brewing (TAP), respectively. Brown-Forman (BF.B) was trading at a 12-month forward PE multiple of 29.9x.

Constellation Brands’ valuation multiple is higher than the S&P 500’s 12-month forward PE multiple of 17.4x.

Analysts expect Constellation Brands’ sales and adjusted EPS to rise 7.4% and 7.3%, respectively, in fiscal 2019, which ends on February 28, 2019. Currently, they expect fiscal 2020 sales and adjusted EPS to increase 7% and 10.3%, respectively.

A strong demand for Constellation Brands’ Mexican beer brands and a focus on premium products are expected to drive its performance in fiscal 2019. The first quarter of fiscal 2019 marked the 32nd straight quarter of growth for its beer business. However, marketing spending and investments in innovation and growth initiatives are expected to put pressure on its bottom line.

Analysts expect the adjusted EPS of Anheuser-Busch InBev, Molson Coors Brewing, and Brown-Forman to increase 10.2%, 9%, and 15.5%, respectively, in their current fiscal years.

In the next part of this series, we’ll look at analysts’ recommendations for Constellation Brands stock.