On Friday, Wells Fargo (NYSE:WFC) reiterated an Overweight rating on shares of Constellation Brands (NYSE:STZ), with a steady price target of $300. The firm's analysis suggests that the company may outperform expectations during the summer season. Wells Fargo's forecast for fiscal years 2025 and 2026 remains unchanged, with earnings per share (EPS) predicted at $13.64 and $15.00, respectively.
The positive outlook is partly based on the anticipation that beer depletions will surpass the bearish projections in the upcoming weeks. Wells Fargo also sees potential for a significant gross margin (GM) expansion for Constellation Brands' beer division.
The detailed analysis indicates the possibility of nearly a 200 basis point increase in GM for the current year, which is higher than the current estimate of a 120 basis point rise. This includes the expected positive impact in the second and fourth fiscal quarters from the resolution of a keg recall and the lapping of a Value-Added Tax (VAT) increase.
Constellation Brands' stock, trading at 17 times Wells Fargo's projected calendar year 2025 earnings per share, is noted for its low double-digit earnings growth. The firm's commentary highlights the company's growth prospects, suggesting that Constellation Brands has yet to demonstrate its full potential in the market.
Wells Fargo's commentary underscores the belief that the upcoming weeks could provide evidence to support their positive stance on Constellation Brands. The firm's analysis points to the company's ability to defy the current market narrative with its performance, especially in the beer segment. The maintained price target reflects a confidence in the company's growth trajectory and market position.
In other recent news, Constellation Brands reported a robust start to fiscal year 2025, primarily driven by its Beer division. The company's first quarter earnings surpassed consensus estimates, reporting earnings per share of $3.57.
Despite a 7% decline in net sales in the Wine and Spirits business, the company is on track to meet its full-year guidance. Analysts from Roth/MKM, BMO (TSX:BMO) Capital, and Jefferies have adjusted their stock price targets and maintained positive ratings for the company, reflecting confidence in Constellation Brands' market position and ability to capitalize on current trends.
In other developments, Constellation Brands returned $185 million to shareholders through dividends and executed $200 million in share repurchases. The Beer portfolio achieved high-single digit net sales growth, marking a 57th consecutive quarter of depletion growth.
Meanwhile, Kuaishou Technology, a prominent short video platform in China, has been assigned a Buy rating by Citi, emphasizing its impressive user engagement and potential for continued margin expansion.
InvestingPro Insights
As Constellation Brands (NYSE:STZ) gears up for what could be a robust summer season, investors may find additional value by considering current financial metrics and market performance. With a market capitalization of $45.62 billion and a Price/Earnings (P/E) ratio of 18.65, slightly below the adjusted P/E for the last twelve months as of Q1 2025 (18.54), the company appears to be valued fairly in terms of earnings. Notably, Constellation Brands has demonstrated a solid revenue growth of 5.25% over the last twelve months as of Q1 2025, indicating a steady upward trajectory in sales.
Two InvestingPro Tips further underscore the company's financial health. First, Constellation Brands has a track record of raising its dividend for 9 consecutive years, signaling a commitment to shareholder returns. Second, the company's liquid assets exceed its short-term obligations, providing financial flexibility and reducing liquidity risk. Additionally, analysts predict the company will maintain profitability this year, a continuation of the profitable trend over the last twelve months.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available for Constellation Brands at https://www.investing.com/pro/STZ. To access these insights, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, offering a comprehensive view of the company's financial landscape and future potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.