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On Friday, TD Cowen maintained a Hold rating for Constellation Brands (NYSE:STZ) with a consistent price target of $180.00. The firm's analysis acknowledges a slowdown in the growth of the key Hispanic demographic, which has been a significant driver of Constellation Brands' beer business. According to InvestingPro data, the company currently trades at an EV/EBITDA multiple of 11.8x, with analyst targets ranging from $165 to $300. The company's revised growth expectations are now set at 0-3% for fiscal year 2026 and 2-4% for 2027-2028. Additionally, Constellation Brands has reduced capital expenditure and overhead costs to align with the current market conditions.
Constellation Brands recently reported earnings per share (EPS) that surpassed expectations for the fourth quarter, maintaining a solid gross profit margin of 52.2%. The company has recognized a persistent deceleration in its core market segment, though InvestingPro analysis indicates net income is expected to grow this year. In response to these market dynamics, Constellation Brands has adjusted its long-term growth projections and scaled back on certain financial commitments.
TD Cowen's analyst cited the adjusted growth rates and cost reductions as appropriate measures given the present economic landscape, suggesting that these revised expectations are already factored into the market's valuation of the company. Despite the cutbacks, the firm believes that Constellation Brands' premium valuation is justified when compared to peers like Molson Coors (NYSE:TAP), which trades at a lower price-to-earnings (P/E) multiple. InvestingPro analysis reveals the company has been aggressively buying back shares and has raised its dividend for 10 consecutive years, with additional insights available in the comprehensive Pro Research Report.
The price target set by TD Cowen implies a P/E multiple of 13 times the firm's projected fiscal year 2027 EPS of $13.80 for Constellation Brands. With an overall Financial Health Score rated as "GOOD" by InvestingPro, this target reflects the analyst's view of the company's sustained value, supported by the strong growth performance of its Modelo, Corona, and Pacifico beer brands, even amidst a challenging market for its primary consumer base.
Constellation Brands' strategic adjustments aim to preserve financial stability and adapt to the evolving market conditions. With a beta of 0.79 and a current ratio of 0.92, the company remains poised to pivot its strategies should the economic environment improve, ensuring flexibility to capitalize on potential opportunities.
In other recent news, Constellation Brands has reported its fourth-quarter earnings for fiscal year 2025, with an earnings per share (EPS) of $2.63, surpassing the consensus estimate of $2.28. The company also exceeded revenue expectations, reporting $2.16 billion against the anticipated $2.15 billion. Despite this positive outcome, Constellation Brands has provided EPS guidance for fiscal year 2026 that falls below the consensus, citing a challenging consumer environment and the impact of tariffs. The company has set its guidance at $12.60 to $12.90, compared to the consensus estimate of $13.45. Additionally, Constellation Brands announced the divestiture of its mainstream wine brands, expected to generate proceeds of approximately $900 million. This strategic decision aims to realign the company's portfolio and focus on core growth areas. Analyst firms have adjusted their outlooks, with BofA Securities, BMO Capital Markets, and Citi reducing their price targets but maintaining their respective ratings on the stock. These recent developments highlight Constellation Brands' efforts to navigate industry challenges and set realistic growth targets.
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