Constellation Brands Analysts Bullish After Q1 Print

Beverage company Constellation Brands, Inc. (NYSE: STZ) reported first-quarter results Friday that came in better than expected on the top-and-bottom line and prompted multiple Street analysts to reaffirm bullish stances. 

The Analysts

BMO Capital Markets' Amit Sharma maintained an Outperform rating on Constellation Brands with an unchanged $225 price target.

Jefferies' Kevin Grundy maintained at Buy with a price target lifted from $264 to $274.

Bank of America Merrill Lynch's Bryan Spillane maintained a Buy rating with an unchanged $221 price target.

BMO: 'More Confidence' In Bull Thesis

Constellation's first-quarter report should give investors "more confidence" in the bull thesis, Sharma said in a Monday note. 

The print also supports an outlook of at least a high-single digit core EPS growth through 2022 for three reasons, the analyst said:

Despite cold weather, the company still saw 6.6% beer depletion (sales-to-retailers) growth from increased marketing in Premier and a revival in Corona.

Power Brands saw 4.2% depletion growth, which reaffirms an "attractive picture" of the revived wine portfolio.

Constellation's core EPS guidance range of $8.65-$8.50 looks conservative given solid volume and pricing leverage, productivity benefits and favorable foreign exchange trends.

Jefferies: Conference Call Takeaways

Investor concern heading into Constellation's report may have been unfounded, as the company reported a solid earnings report, including topline growth, gross margin and earnings beats, Grundy said in a Sunday note. 

During the post-earnings conference call, the company highlighted a strong start to the fiscal second quarter and specifically called out a focus "entirely around Refresca this [summer] season," the analyst said. 

Hard seltzers realized a larger component of growth in the high-end category compared to prior periods, Grundy said. 

On the other hand, management said it is "not pleased" with Canopy Growth Corp (NYSE: CGC)'s quarter but said that expectations moving forward are "mostly on track" to become a $1-billion run-rate business by the end of the next fiscal year, according to Jefferies. 

BofA: 4 'Callouts' For New Quarter

Investors should be aware of four "callouts" for the fiscal second quarter, Spillane said in a Monday note. 

They are: 

The quarter includes lapping 10% beer depletion growth last year along with one less day in the current quarter.

Marketing spend for multiple brands will remain elevated.

A shipment timing benefit will impact beer volume growth and margins.

The 18% tax rate seen in the fiscal first quarter should remain similar.

Price Action

Constellation shares were down 1.84% at $193.32 at the time of publication Monday. 

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