Constellation Brands Inc (NYSE:STZ) will report its fourth quarter earnings next week, with UBS analysts flagging a “tricky” market setup despite what it sees as improved top line visibility and an attractive valuation.
The firm believes that while Constellation Brands, whose portfolio features Kim Crawford, Corona and Modelo Especial, has historically delivered upside, “we would not be surprised if the print next week saw a more muted reaction on the day,” reflecting uncertainty around investor expectations and management’s guidance.
UBS maintained its Q4 earnings per share (EPS) estimate at $1.59, below Visible Alpha and FactSet consensus of $1.74 and $1.70, respectively.
The analysts also highlighted the potential caution in fiscal 2027 guidance. “Given a volatile/uncertain backdrop, we would not be surprised if management's initial guidance embedded increased flexibility, especially with a pending CEO change on the horizon,” they wrote.
They expect beer margins to come in around 36% to 38%, compared to prior guidance of 39% to 40%, and project 2027 EPS of $12.09, with beer top-line growth of 2.4% and operating profit margin near 37.5%.
For the beer segment, UBS forecasts fourth-quarter depletions down 0.5%, slightly better than Street expectations of -1.1%. “The gap between depletions and scanner data has been somewhat nonexistent in recent quarters, which we believe is due to regional differences in growth rather than channel dynamics,” they wrote.
Despite near-term volatility risks, UBS sees a compelling medium-term setup, raising its 12-month price target to $176 from $168 on continued revenue potential, market share momentum, and events such as the World Cup. The firm has a ‘Buy’ rating on the company.
Shares of Constellation Brands were little changed at $152 on Thursday morning, up almost 10% so far this year.
The company will report its Q4 earnings on April 9.