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On Monday, Bernstein analysts, led by Nadine Sarwat, increased the price target for Constellation Brands (NYSE:STZ) shares to $260 from the previous $230, while maintaining an Outperform rating. Currently trading at $173.86, the stock sits below analyst targets ranging from $165 to $300. According to InvestingPro analysis, the company appears undervalued based on its Fair Value model. The adjustment follows recent clarifications regarding tariffs on aluminum, which is a significant component in the company’s cost of goods sold (COGS).
The US Commerce Department published an amendment on April 2nd to the Aluminum Presidential Proclamation, adding imports of beer and empty aluminum cans to the list of products subject to a 25% tariff. The industry faced uncertainty over whether the tariff would apply to all beer, just canned beer, or solely to the aluminum used in cans. It was finally clarified late on Friday that the tariff only applies to the aluminum content of the beer can, and not the beer itself, as stated by Jeffrey Kessler, undersecretary at the Commerce Department’s Bureau of Industry and Security. This news comes as Constellation maintains a healthy gross profit margin of 51.5% and has consistently raised its dividend for 10 consecutive years.
Bernstein’s analysis suggests that packaging represents approximately 43% of Constellation Brands’ COGS mix, with aluminum cans making up about 39% of the company’s beer packaging mix. The targeted tariff is estimated to pose only about a 200 basis points headwind to the beer gross margin. This impact could be nearly offset through modest incremental pricing and/or the year-over-year depreciation of the Mexican Peso.
Investors are now looking forward to Constellation Brands’ Fiscal Year 2025 results, which are set to be released after the market closes on April 9th. A conference call is scheduled for 10:30 am ET on April 10th. While the results are significant, the focus is expected to be on the implications of the tariff adjustments rather than the figures themselves. With analysts forecasting EPS of $13.56 for FY2025, investors can access deeper insights and additional ProTips through InvestingPro’s comprehensive research reports.
In other recent news, Constellation Brands is preparing to release its fiscal fourth-quarter 2025 earnings report, which is highly anticipated by investors. BofA Securities has maintained a Neutral stance on the company, with a consistent price target of $205, while adjusting the earnings per share (EPS) estimate for the fourth quarter of 2025 to $2.36. On the other hand, Needham reduced its price target for Constellation Brands from $240 to $215, maintaining a Buy rating, citing challenges with growth trends and its core Hispanic consumer base. Evercore ISI also lowered its price target to $225, highlighting a decline in tracked channel volumes and the impact of external factors like adverse weather conditions.
TD Cowen has further adjusted its outlook, reducing the price target from $240 to $200, citing concerns over anticipated tariffs and a forecasted slowdown in beer consumption. The firm maintains a Hold rating on Constellation Brands, noting that management is expected to address these challenges in their upcoming guidance. Analysts from TD Cowen predict a potential 20% reduction in EPS for fiscal year 2026 due to the planned tariffs on Mexico and Canada. Meanwhile, Jefferies has raised its price target for Celsius Holdings (NASDAQ:CELH) from $40 to $44, maintaining a Buy rating, although the firm anticipates a challenging first quarter due to subdued demand and rising inflation expectations. These developments reflect the complex landscape both companies are navigating, with investors keenly observing the upcoming earnings reports and guidance.
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