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On Friday, CFRA analyst Garrett Nelson downgraded Constellation Brands (NYSE:STZ) stock, trading on the New York Stock Exchange (NYSE:STZ), from a Strong Buy to a Buy, also reducing the 12-month price target from $335.00 to $275.00. Currently trading at $185.21, significantly below its 52-week high of $274.87, InvestingPro analysis suggests the stock is currently undervalued. The adjustment of the price target is based on a forward price-to-earnings (P/E) ratio of 18.6x for fiscal year 2026, which is a discount compared to the company's 10-year mean forward P/E of 22.5x.
Nelson revised the adjusted earnings per share (EPS) estimates for Constellation Brands, setting them at $13.55 for fiscal year 2025, down from the previous estimate of $13.80, and at $14.75 for fiscal year 2026, decreased from $15.25.
According to InvestingPro data, seven analysts have recently revised their earnings estimates downward for the upcoming period. This revision follows the company's November-quarter adjusted EPS report of $3.25, which was a slight increase from $3.24 year over year but fell short of the consensus estimate of $3.31.
The reported quarterly earnings highlighted that net sales had dropped by 0.4% to $2.46 billion, which was $70 million below the consensus. However, there was an expansion in gross margin by 70 basis points to 52.1%, which was 10 basis points above the consensus expectation.
In the wake of these financial results, Constellation Brands has revised its fiscal year 2025 adjusted EPS guidance downwards to a range of $13.40 to $13.80, from the previously projected range of $13.60 to $13.80. Nelson cited several reasons for the downgrade in stock rating, including near-term challenges for the sector and industry such as a difficult price/volume growth environment, unfavorable demographic consumption trends, and the impact of a stronger dollar.
The analyst maintains a positive outlook on Constellation Brands, recognizing it as a leading company in the sector with potential for continued market share growth in the domestic beer market. InvestingPro data reveals the company has maintained a strong financial position with a dividend growth rate of 13.48% and has raised its dividend for 10 consecutive years.
Despite the positive aspects, the near-term headwinds have led to a more cautious rating. For deeper insights into Constellation Brands' financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
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