Constellation Brands has ‘brighter days ahead’ after Q2 earnings

Constellation Brands Inc (NYSE: STZ) lost about 2.0% today even though it reported market-beating results for its fiscal second quarter.

Constellation saw weakness in wine and spirits

The stock is trending down perhaps because investors are focusing on a 14% annualised decline in its wine and spirits sales to $444.1 million. Still, Gerald Pascarelli of Wedbush Securities said today on Yahoo Finance Live:

Constellation is historically a volume-driven revenue growth story. That’s what we’re seeing now. This is a stock that very much trades on beer.

On the plus side, Constellation Brands cited strength in “Modelo” as it raised its profit outlook for fiscal 2024. The beverage company now forecasts $12 to $12.20 of adjusted EPS this year versus analysts at $11.72.

Constellation Brands now sees up to a 9.0% increase in beer sales while wine and spirits sales are expected to remain roughly unchanged in fiscal 2024.

Notable figures in Constellation Brands Q2 earnings

• Earned $690 million that translates to $3.74 per share
• Had $1.15 billion of loss instead ($6.30 a share) last year
• Adjusted EPS printed at $3.70 as per the press release
• Sales went up 7.0% year-on-year to $2.837 billion
• Consensus was $3.37 per share on $2.824 billion revenue
• Beer sales increased 12% in the first financial quarter.

Modelo Especial continued to top all other beer brands in the United States – up 9.0% versus last year. Wedbush analyst Pascarelli reiterated his “buy” rating on Constellation Brands ahead of the earnings release.

We think the company (Constellation Brands) is set up for brighter days ahead.

He raised his price target as well to $300 which suggests more than a 20% upside from here.

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