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Constellation Brands (STZ) Q2 Earnings: Is a Beat Likely?

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We expect the leading alcohol company, Constellation Brands Inc. (STZ - Free Report) to beat expectations when it reports second-quarter fiscal 2018 results on Oct 5.

Last quarter, the company delivered a positive earnings surprise of 18.2%. In fact, its earnings have outperformed the Zacks Consensus Estimate by an average of 11.7% in the trailing four quarters. Let’s see how things are shaping up for this announcement.

What to Expect?

The question lingering in investors’ minds now is whether Constellation Brands will be able to post positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the fiscal second quarter has been stable in the last 30 days. The current estimate of $2.16 per share for the to-be-reported quarter reflects year-over-year growth of nearly 22%. Further, analysts polled by Zacks expect revenues of $2.06 billion, which is 1.9% higher than the year-ago quarter.

We note that the stock has outperformed the industry year to date. The company’s shares have surged 30.1%, while the industry grew 19.9%.



Factors at Play

Constellation Brands has been on a roll owing to its strong brand portfolio, strategic initiatives and robust quarterly results. The company’s focus on brand building, strength in beer business and efforts to include new products in its wine and spirits portfolio are the key catalysts. Further, it has been gaining from effective integration and growth of recently acquired brands, higher margins, solid overall depletion trends and strong consumer demand.

In fact, these factors assisted the company to showcase another sterling performance in first-quarter fiscal 2018, marking its 16th straight quarter of earnings growth year-over-year and 11th straight positive surprise. Moreover, sales advanced while favorable pricing, volumes and lower cost of goods sold provided a boost to margins.

Further, the company continues to gain from the recent buyouts and strength in the beer business, which encouraged management to raise fiscal 2018 earnings view. Management also hiked fiscal 2018 operating income targets for the beer segment. The company now envisions adjusted earnings guidance in a range of $7.90-$8.10 per share. Operating income is now expected to grow 13-15% for the beer segment.

The company is also on track with its Nava brewery expansion, while it also enhanced its wine portfolio with the buyout of Schrader Cellars. These factors make us optimistic about the company’s upcoming results.

What the Zacks Model Unveils?

Our proven model shows that Constellation Brands is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. The Most Accurate estimate is $2.17 per share while the Zacks Consensus Estimate is pegged lower at $2.16 per share. So the ensuing +0.53% ESP and Zacks Rank #2 makes us reasonably confident of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks Poised to Beat Earnings Estimates

Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

McDonald's Corporation (MCD - Free Report) currently has an Earnings ESP of +3.77% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Procter & Gamble Company (PG - Free Report) currently has an Earnings ESP of +0.44% and a Zacks Rank #2.

Build-A-Bear Workshop, Inc. (BBW - Free Report) has an Earnings ESP of +13.79% and a Zacks Rank #2.

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