We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why Constellation Brands (STZ) Marches Ahead of Industry
Read MoreHide Full Article
Constellation Brands (STZ - Free Report) continues to gain from strength in the company’s beer business, as well as its premiumization strategy.
The company’s beer business has been gaining from robust performances of Modelo Especial, the Modelo Chelada brands, Corona Extra and Pacifico.
In second-quarter fiscal 2024, sales advanced 12% year over year in the beer business and beat our estimate of 3.6% growth. Modelo Especial continued to be the No. 1 beer brand by sales in the high-end category, strengthening its leadership position. It was also the largest share gainer in the U.S. beer category in IRI channels.
Meanwhile, Modelo Chelada was the No. 1 brand in the U.S. beer market and held about 70% share of the entire chelada category. Corona Extra retained its third position as a high-end beer brand. For fiscal 2024, sales are likely to increase 8-9% for the beer segment, in line with our estimate of 8.4% growth.
Encouraged by the quarterly results, it is on track with plans to invest in the next phase of capacity expansion in Mexico. This will help meet the potential demand for the high-end Mexican beer portfolio, including the emerging Alternative Beverage Alcohol sub-space that comprises hard seltzers. It also targets continued expansion, and the optimization of the existing Nava and Obregon breweries.
Constellation Brands’ premiumization strategy bodes well, driven by accelerated growth for Power Brands in second-quarter fiscal 2024. Its Wine and Spirits Business has been shifting its portfolio to higher-end brands that are better aligned with consumer-led premiumization trends.
The company's high-end Power Brands, including The Prisoner Brand Family, Kim Crawford and Meiomi, were the key growth drivers. The beer segment witnessed gains from premiumization, driven by growth in traditional beer, as well as the flavors category, including seltzers, flavored beer, RTD spirits and flavored malt beverages. The company is making investments to fuel growth of its power brands through innovation, and capitalizing on priority and consumer trends, with successful product introductions.
Consequently, management expects fiscal 2024 comparable earnings of $12.00-$12.20 per share (excluding canopy growth impacts) compared with $11.70-$12 per share mentioned earlier and in sync with our estimate of $12.02. Comparable earnings per share are anticipated to be $11.77-$11.97 for fiscal 2024, in line with our estimate of $11.79. Notably, the company reported comparable earnings of $10.65 per share and $11.40 (excluding canopy growth impacts) for fiscal 2023.
Constellation Brands anticipates earnings of $9.60-$9.80 per share on a reported basis compared with $9.35-$9.65 stated earlier. On a reported basis, STZ posted a loss of 11 cents for fiscal 2023. Net sales are likely to increase 8-9% for the beer segment, with the operating income rising 6-7%. Meanwhile, we predict sales in the beer segment to grow 8.4% and operating income to increase 7%. The company expects organic net sales for the wine and spirits business between down 0.5% and up 0.5%, in line with our estimate of down 0.1%. The operating income for the wine and spirits segment is envisioned to grow 2-4%, in sync with our estimate of 4% growth.
These factors led this Zacks Rank #2 (Buy) stock to gain 4.8% year to date against the industry’s decline of 6.4%.
Image Source: Zacks Investment Research
However, the company has been witnessing higher packaging and raw material costs from continued inflationary pressures. Also, increased depreciation and operating costs from brewery capacity expansions act as deterrents. Going into fiscal 2024, the company reels under higher packaging and raw material, freight, and overhead costs.
Conclusion
We hope that strength in its beer business, solid demand and the premiumization strategy are likely to offset cost headwinds and drive growth in the near future. Topping it, a Growth Score of B drives optimism.
Analysts also seem optimistic about the stock. The Zacks Consensus Estimate for STZ’s fiscal 2024 sales and EPS is pegged at $10.1 billion and $11.87, suggesting respective growth of 6.6% and 11.5% from the year-ago reported figures. The Zacks Consensus Estimate for fiscal 2024 earnings has moved up 2.2% in the past 60 days.
The PEG ratio for STZ is just 1.89, a level that is lower than the industry average of 1.96. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, STZ is a solid choice on the value front from multiple angles.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 27.8% and 21.8%, respectively, from the year-ago reported numbers.
The J. M. Smucker Company (SJM - Free Report) , a branded food and beverage product company, currently carries a Zacks Rank #2. SJM has a trailing four-quarter earnings surprise of 7.3%, on average.
The Zacks Consensus Estimate for J. M. Smucker’s current fiscal-year earnings suggests growth of 8.9% from the year-ago reported figure.
Celsius Holdings (CELH - Free Report) , which offers functional drinks and liquid supplements, currently carries a Zacks Rank #2. CELH delivered an earnings surprise of 100% in the last reported quarter.
The Zacks Consensus Estimate for Celsius Holdings’ current fiscal-year sales and earnings suggests growth of 88.9% and 170.3%, respectively, from the year-ago reported numbers.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Here's Why Constellation Brands (STZ) Marches Ahead of Industry
Constellation Brands (STZ - Free Report) continues to gain from strength in the company’s beer business, as well as its premiumization strategy.
The company’s beer business has been gaining from robust performances of Modelo Especial, the Modelo Chelada brands, Corona Extra and Pacifico.
In second-quarter fiscal 2024, sales advanced 12% year over year in the beer business and beat our estimate of 3.6% growth. Modelo Especial continued to be the No. 1 beer brand by sales in the high-end category, strengthening its leadership position. It was also the largest share gainer in the U.S. beer category in IRI channels.
Meanwhile, Modelo Chelada was the No. 1 brand in the U.S. beer market and held about 70% share of the entire chelada category. Corona Extra retained its third position as a high-end beer brand. For fiscal 2024, sales are likely to increase 8-9% for the beer segment, in line with our estimate of 8.4% growth.
Encouraged by the quarterly results, it is on track with plans to invest in the next phase of capacity expansion in Mexico. This will help meet the potential demand for the high-end Mexican beer portfolio, including the emerging Alternative Beverage Alcohol sub-space that comprises hard seltzers. It also targets continued expansion, and the optimization of the existing Nava and Obregon breweries.
Constellation Brands’ premiumization strategy bodes well, driven by accelerated growth for Power Brands in second-quarter fiscal 2024. Its Wine and Spirits Business has been shifting its portfolio to higher-end brands that are better aligned with consumer-led premiumization trends.
The company's high-end Power Brands, including The Prisoner Brand Family, Kim Crawford and Meiomi, were the key growth drivers. The beer segment witnessed gains from premiumization, driven by growth in traditional beer, as well as the flavors category, including seltzers, flavored beer, RTD spirits and flavored malt beverages. The company is making investments to fuel growth of its power brands through innovation, and capitalizing on priority and consumer trends, with successful product introductions.
Consequently, management expects fiscal 2024 comparable earnings of $12.00-$12.20 per share (excluding canopy growth impacts) compared with $11.70-$12 per share mentioned earlier and in sync with our estimate of $12.02. Comparable earnings per share are anticipated to be $11.77-$11.97 for fiscal 2024, in line with our estimate of $11.79. Notably, the company reported comparable earnings of $10.65 per share and $11.40 (excluding canopy growth impacts) for fiscal 2023.
Constellation Brands anticipates earnings of $9.60-$9.80 per share on a reported basis compared with $9.35-$9.65 stated earlier. On a reported basis, STZ posted a loss of 11 cents for fiscal 2023. Net sales are likely to increase 8-9% for the beer segment, with the operating income rising 6-7%. Meanwhile, we predict sales in the beer segment to grow 8.4% and operating income to increase 7%. The company expects organic net sales for the wine and spirits business between down 0.5% and up 0.5%, in line with our estimate of down 0.1%. The operating income for the wine and spirits segment is envisioned to grow 2-4%, in sync with our estimate of 4% growth.
These factors led this Zacks Rank #2 (Buy) stock to gain 4.8% year to date against the industry’s decline of 6.4%.
Image Source: Zacks Investment Research
However, the company has been witnessing higher packaging and raw material costs from continued inflationary pressures. Also, increased depreciation and operating costs from brewery capacity expansions act as deterrents. Going into fiscal 2024, the company reels under higher packaging and raw material, freight, and overhead costs.
Conclusion
We hope that strength in its beer business, solid demand and the premiumization strategy are likely to offset cost headwinds and drive growth in the near future. Topping it, a Growth Score of B drives optimism.
Analysts also seem optimistic about the stock. The Zacks Consensus Estimate for STZ’s fiscal 2024 sales and EPS is pegged at $10.1 billion and $11.87, suggesting respective growth of 6.6% and 11.5% from the year-ago reported figures. The Zacks Consensus Estimate for fiscal 2024 earnings has moved up 2.2% in the past 60 days.
The PEG ratio for STZ is just 1.89, a level that is lower than the industry average of 1.96. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, STZ is a solid choice on the value front from multiple angles.
Other Stocks to Consider
Lamb Weston (LW - Free Report) , which offers frozen potato products, currently sports a Zacks Rank #1 (Strong Buy). LW delivered an earnings surprise of 46.2% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 27.8% and 21.8%, respectively, from the year-ago reported numbers.
The J. M. Smucker Company (SJM - Free Report) , a branded food and beverage product company, currently carries a Zacks Rank #2. SJM has a trailing four-quarter earnings surprise of 7.3%, on average.
The Zacks Consensus Estimate for J. M. Smucker’s current fiscal-year earnings suggests growth of 8.9% from the year-ago reported figure.
Celsius Holdings (CELH - Free Report) , which offers functional drinks and liquid supplements, currently carries a Zacks Rank #2. CELH delivered an earnings surprise of 100% in the last reported quarter.
The Zacks Consensus Estimate for Celsius Holdings’ current fiscal-year sales and earnings suggests growth of 88.9% and 170.3%, respectively, from the year-ago reported numbers.