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On Friday, Citi analyst Filippo Falorni adjusted the price target for Constellation Brands (NYSE:STZ) stock, decreasing it to $190 from the previous $200, while maintaining a Neutral stance. According to InvestingPro data, analyst targets for the stock range from $165 to $300, with the current consensus maintaining a moderate buy recommendation. The revision followed an eventful fiscal fourth quarter for the beverage company, which included better-than-expected results, the divestiture of part of its wine portfolio, and a significant reduction in its medium-term forecast.
Constellation Brands' stock experienced a modest increase of 0.7% on the day, contrasting with the S&P 500's drop of 3.5%. The company's fiscal fourth quarter was marked by several developments that provided material for both optimistic and pessimistic investors. On the positive side, the company's beer segment's medium-term revenue guidance was adjusted to a growth range of 2-4%, a significant decrease from the previous 7-9%. This new guidance, which also sets the fiscal year 2026 expectation at 0-3%, is seen as de-risking the company's financial outlook. Additionally, the removal of the worst-case tariff scenario and the support from Constellation Brands' share buybacks are considered favorable factors.
Conversely, negative near-term beer trends were noted, with concerns that the slowdown could be more structural than cyclical. The unchanged beer operating margin (OM) guidance of 39-40% was also seen as potentially too ambitious. The valuation of Constellation Brands' stock was compared unfavorably to that of competitor Molson Coors Beverage Company (NYSE:TAP), suggesting there might still be downside potential.
Citi's neutral position reflects a balance between these factors. While the firm acknowledges the lack of immediate upside catalysts and concerns about the potential ongoing weakness among Hispanic consumers, it also recognizes that the lowered beer revenue expectations have limited the downside risk at the current valuation. The company's new guidance and strategic moves have set a revised stage for Constellation Brands going forward.
In other recent news, Constellation Brands reported its fiscal Q2 2025 earnings, exceeding both earnings per share (EPS) and revenue expectations. The company achieved an EPS of $2.63, surpassing the forecasted $2.33, while revenue reached $2.16 billion, slightly above the anticipated $2.15 billion. This strong performance highlights continued growth in the company's beer segment, driven by brands like Corona and Pacifico. Constellation Brands has also set ambitious financial targets for the future, aiming for $9 billion in operating cash flow and $6 billion in free cash flow from fiscal 2026 to 2028. The company plans to expand its distribution and focus on innovation to sustain its growth trajectory.
In terms of strategic developments, Constellation Brands is looking to enhance its portfolio by divesting certain wine brands, a move expected to yield significant cost savings. The company anticipates over $200 million in net annualized savings by fiscal 2028 through restructuring actions. Additionally, Constellation Brands is committed to a disciplined capital deployment strategy, including a $4 billion share repurchase authorization over the next three years. Analyst firms such as Barclays (LON:BARC) and RBC Capital Markets have shown interest in the company's strategies, particularly regarding tariffs and consumer sentiment, which are influencing market dynamics. These developments reflect Constellation Brands' proactive approach to navigating economic challenges while maintaining strong brand health and market presence.
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