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Constellation Brands' (STZ) Q4 Earnings: Will Sales Revive?

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Constellation Brands, Inc. (STZ - Free Report) is scheduled to report fourth-quarter fiscal 2018 results on Mar 29.

Notably, this leading wine company has a record of 18 straight quarters of year-over-year earnings growth and 13 consecutive positive surprises. The company pulled off an average positive earnings surprise of 11.9% in the preceding four quarters.

The Zacks Consensus Estimate for fourth-quarter earnings remained stable at $1.74 over the last 30 days. However, the estimate reflects year-over-year growth of 17.6% from $1.48 in the prior-year quarter.

Constellation Brands Inc Price, Consensus and EPS Surprise

Constellation Brands Inc Price, Consensus and EPS Surprise | Constellation Brands Inc Quote

Factors at Play

Constellation Brands has been performing well on the back of its solid brand portfolio, strategic initiatives and robust quarterly results. The company’s focus on brand building and strength in the beer business 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, third-quarter fiscal 2018 witnessed significant market share gains, margin expansion, strong free cash flow and solid execution. This along with the strength in the beer business led management to raise earnings outlook for fiscal 2018. Adjusted earnings are envisioned in a range of $8.40-$8.50 per share, up from the previous guided range of $8.25-$8.40. The Zacks Consensus Estimate for the fiscal year is pegged at $8.54.

For fiscal 2018, management expects net sales for the beer segment to grow 9-11%. Operating income at the segment is envisioned to increase in a band of 18-19%.

Consequently, analysts polled by Zacks expect the company's total revenue to be $1.76 billion, which is roughly 8% higher than the year-ago quarter.

However, softness in the company’s wine and spirits business continue to impact the overall sales. Apparently, the top line in the previous quarter declined year over year and lagged estimates mainly due to weakness in the wine and spirits business as well as the sale of the Canadian wine business. The segment also witnessed lower operating income due to rise in spending on marketing initiatives and higher cost of goods sold. For fiscal 2018, it expects results at this segment to be at the lower end of the sales and operating income guidance ranges due to slowdown in the industry.

What the Zacks Model Unveils

Our proven model does not show 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Constellation Brands has an Earnings ESP of +0.94%. However, the company’s Zacks Rank #4 (Sell) makes our surprise prediction difficult.

As it is we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Poised to Beat Earnings Estimates

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

Archer Daniels Midland Company (ADM - Free Report) has an Earnings ESP of +3.31% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Post Holdings, Inc. (POST - Free Report) has an Earnings ESP of +2.40% and a Zacks Rank #1.

lululemon athletica inc. (LULU - Free Report) has an Earnings ESP of +1.30% and a Zacks Rank #3.

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