Constellation Brands (NYSE:STZ) reports first-quarter earnings on Friday, June 30, before the market opens and analysts at UBS say stronger growth in the beverages group’s beer category has improved sentiment heading into the results.
They’ve maintained their ‘Buy’ rating on the stock with an increased 12-month price target of $296, up from $280.
The analysts expect earnings per share of $2.75 for the quarter versus the Visible Alpha consensus of $2.83.
“Shares have outperformed the XLP (consumer staples index) by roughly 12% since reporting F4Q earnings back in early April, as volume trends in tracked channels have re-accelerated and the overhang from a large sale from (shareholder) Sands is now in the rearview,” the analysts wrote.
“In our view, the top-line bar heading into the print has certainly been raised to a degree following positive commentary from CEO Bill Newlands at a competitor conference in late May, but we view this as achievable given improvement in tracked trends.”
The analysts noted that the company has guided for net beer sales to increase by 7% to 9% in 2023, with their wines and spirits (W&S) category expected to be largely flat.
On profitability, the company anticipates operating income growth of 5% to 7% for beer and 2% to 4% for W&S.
“Although the company has demonstrated a willingness to change guidance post 1Q EPS in the past, we expect major components to remain unchanged next week given the rapidly evolving competitive dynamics in the US beer category and ongoing uncertainty around the health of the category/consumer,” the analysts said.
Contact the author at stephen.gunnion@proactiveinvestors.com