Figma Shares Indicated To Open $105/$110
On Monday, Jefferies analyst Kaumil Gajrawala adjusted the price target on Constellation Brands shares, trading on the New York Stock Exchange (NYSE:STZ), reducing it to $196 from the previous target of $201. Currently trading at $186.96, the stock appears fairly valued according to InvestingPro analysis. Despite the lower price target, the analyst maintained a Hold rating on the company's stock, aligning with the overall analyst consensus of 2.12 (moderate buy).
In a recent statement, Gajrawala noted the necessity for a reset in expectations, acknowledging that the beer segment is anticipated to experience slower growth. This slowdown is attributed to both challenging macroeconomic conditions and the natural deceleration that comes with scaling up, known as the law of large numbers. The company maintains a solid financial foundation with an overall "GOOD" Financial Health Score from InvestingPro, and has demonstrated consistent revenue growth with a 5-year CAGR of 4%. However, the analyst emphasized that growth is still expected, albeit at a reduced pace.
The analysis also highlighted several factors that could help mitigate the impact of the slower growth in beer sales. These include the divestiture of certain wine brands, a decrease in capital expenditures, and an increase in stock buybacks. The company has maintained a shareholder-friendly approach, with management actively buying back shares and maintaining a dividend yield of 2.19%, having raised dividends for 10 consecutive years. According to Gajrawala, these measures may partially compensate for the revised growth expectations.
Looking forward, the analyst projected that fiscal year 2027 (F27) might mark a return to earnings per share (EPS) levels near those reported for fiscal year 2025 (F25), which was $13.78. Beyond that point, Gajrawala anticipates low-single-digit top-line growth and mid-single-digit EPS growth.
The report concluded with the assertion that any potential upside for Constellation Brands is likely to begin with an improvement in the macroeconomic environment. However, the analyst noted that predicting such changes is challenging and suggested that it is too early to alter the Hold rating on the stock.
In other recent news, Constellation Brands reported its fourth-quarter earnings, exceeding expectations with earnings per share (EPS) of $2.63 compared to the forecasted $2.28. Revenue also surpassed estimates, reaching $2.16 billion against the anticipated $2.15 billion. Despite the positive earnings report, Constellation Brands has adjusted its medium-term growth projections for its beer segment, citing a challenging consumer environment and the impact of tariffs. The company now projects beer net sales growth of 0-3% for fiscal year 2026 and 2-4% for fiscal years 2027-2028.
Following these developments, several analyst firms have adjusted their price targets for Constellation Brands. TD Cowen maintained a Hold rating with a $180 price target, while BofA Securities reduced its target from $205 to $195, maintaining a Neutral rating. BMO Capital Markets also revised its target from $260 to $215 but kept an Outperform rating on the stock. Citi adjusted its price target to $190 from $200, maintaining a Neutral stance.
The company has also announced strategic moves, including the divestiture of some wine brands, expected to generate approximately $900 million. This decision aims to simplify operations and focus on core growth areas. Despite these adjustments, Constellation Brands remains committed to maintaining its margin goals and has set ambitious cash flow targets for the coming years. Analysts from BMO Capital Markets remain optimistic about the company's long-term potential, despite the revised guidance.
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