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How Analysts Reacted to Constellation Brands’ Q4 Results

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Analysts’ reaction to results

Constellation Brands (STZ) announced better-than-expected results for the fourth quarter of fiscal 2019 on April 4 backed by the strength in its beer business. The quarter ended on February 28. Constellation Brands stock rose 6.5% on April 4 in reaction to the company’s fourth-quarter results and the decision to divest 30 wine and spirits brands. Constellation Brands is selling 30 brands with a retail price of $11 or below from its wine and spirits portfolio to E & J Gallo Winery for $1.7 billion. This move is so that Constellation Brands can focus on its high-end wine and spirits business.

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On April 5, Deutsche Bank lowered its rating for Constellation Brands to “hold” from “buy,” as the firm thinks that risk-reward looks balanced following the rally after its results. However, Deutsche Bank raised its price target for Constellation Brands to $194 from $191. On April 5, Morgan Stanley lowered its price target to $230 from $233 due to concerns about the company’s outlook.

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The analysts that raised their price target included the following:

  • Jefferies: to $267 from $255
  • JP Morgan: to $214 from $193
  • Guggenheim: to $173 from $164
  • Macquarie: to $183 from $162
  • Cowen and Company: to $240 from $220

Current ratings

As of April 5, Constellation Brands stock was rated a “buy” by 19 (or 76%) out of 25 analysts.  Six analysts had a “hold” recommendation for Constellation Brands stock, while no analyst had a “sell” rating.

Constellation Brands ended fiscal 2019 on a strong note. Its adjusted EPS for the fourth quarter declined 2.6% to $1.84 but easily surpassed analysts’ expectation of $1.71. The company delivered revenue growth of 2.0% in the fourth quarter against analysts’ expectation of a 1.5% decline. Constellation Brands projects strong growth in its premium beer, wine, and spirits portfolio as well as in the cannabis space through its 38% stake in Canopy Growth (CGC).

As of April 5, Constellation Brands stock was up 20.2% on a YTD basis. Stocks of peers Anheuser-Busch InBev (BUD), Molson Coors Brewing (TAP), and Brown-Forman (BF.B) were up 31.2%, 8.0%, and 11.9%, respectively, as of April 5.

The average 12-month price target of $218.87 for Constellation Brands stock indicates an upside of about 13%.

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