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Here's How Constellation Brands (STZ) is Placed for Q2 Earnings

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Constellation Brands, Inc. (STZ - Free Report) is scheduled to release second-quarter fiscal 2022 results on Oct 6, 2021. The alcoholic beverage bigwig is likely to deliver top and bottom-line growth in the to-be-reported quarter.

The Zacks Consensus Estimate for the company’s fiscal second-quarter earnings is pegged at $2.84, indicating 2.9% growth from the year-ago quarter’s reported figure. The consensus mark has been unchanged in the past 30 days. The consensus mark for revenues is pegged at $2.34 billion, suggesting a 3.7% increase from the prior-year quarter’s reported figure.

In the last reported quarter, the alcohol behemoth delivered a negative earnings surprise of 0.9%. However, its bottom line beat estimates by 14.9%, on average, over the trailing four quarters.

Constellation Brands Inc Price and EPS Surprise


Constellation Brands Inc Price and EPS Surprise

Constellation Brands Inc price-eps-surprise | Constellation Brands Inc Quote

Key Factors to Note

Constellation Brands has been resilient in a tough environment, driven by continued strength in the beer business, and robust shipment and depletion volume growth, which have been boons for its strong quarterly performance. The company’s premiumization strategy has been playing out well. Its focus on capitalizing on the hard seltzer boom has also been a driver.

The company has been significantly gaining from strength in the beer business over the years. Solid portfolio depletions and market share gains in the beer business have been stemming from continued strength in the Modelo and the Corona Brand Family. Depletion volume in first-quarter fiscal 2022 benefited from robust consumer demand in the off-premise channel as well as the return of the on-premise channel to growth. The persistence of the trends is expected to have aided the company’s top line in the to-be-reported quarter.

The company’s wine & spirits premiumization strategy is playing out well, as evident from the accelerated growth rates for Power Brands. The high-end Power Brands, including Kim Crawford, Meiomi and The Prisoner Brand Family, have been witnessing double-digit growth. This along with gains from consumer-driven innovation initiatives are likely to have aided the segment’s organic sales in the fiscal second quarter.

The company has been capitalizing on the opportunities in the fast-growing hard seltzer category. It is on track with continued innovation and product launches to strengthen its competitive position in the hard seltzer category, broaden its distribution reach and enhance market share in the higher end of the U.S. beer market. The Corona Hard Seltzer, launched in early 2020, has achieved the number four position in the category and is currently the second-fastest-moving hard seltzer. The initiatives are expected to have boosted the company’s performance in the to-be-reported quarter.

Despite the premiumization efforts, Constellation Brands has been witnessing softness in its wine & spirits business for a while now. Out-of-stock conditions at some of the SKUs due to the impacts of global supply-chain logistics, route to market changes, and the company's transition to SAP hurt the segment’s sales in the fiscal first quarter. Soft trends in the wine & spirits business are expected to have weighed on the fiscal second-quarter performance.

The impacts of adjustments related to the loss from the Canopy Growth deal and other activities are likely to have been headwinds. The company is expected to have witnessed certain impacts from the ongoing supply-chain constraints, leading to product shortages and rising freight costs.

Zacks Model

Our proven model does not conclusively predict an earnings beat for Constellation Brands this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Constellation Brands has a Zacks Rank #3 and an Earnings ESP of -0.71%.

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 deliver an earnings beat:

The Coca-Cola Company (KO - Free Report) presently has an Earnings ESP of +0.99% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

PepsiCo, Inc. (PEP - Free Report) currently has an Earnings ESP of +0.23% and a Zacks Rank #3.

The Procter & Gamble Company (PG - Free Report) has an Earnings ESP of +2.42% and a Zacks Rank #3 at present.