D-Wave Quantum falls nearly 3% as earnings miss overshadows revenue beat
On Monday, UBS maintained a Buy rating on Constellation Brands (NYSE:STZ) stock but reduced the price target to $265 from $288, ahead of the company's third-quarter earnings report. According to InvestingPro data, analyst targets for the stock range from $255 to $325, with the current share price at $221.92.
UBS adjusted the firm's underlying assumptions based on recent performance data, though the earnings per share (EPS) estimates for the third quarter and full fiscal year remained unchanged at $3.24 and $13.67, respectively.
Constellation Brands is set to announce its fiscal third-quarter earnings before the market opens this Friday. InvestingPro analysis shows the company maintains strong financial health with a current ratio of 1.25, indicating sufficient liquidity to meet short-term obligations.
UBS noted that since the end of the previous quarter, Constellation Brands' shares have underperformed the broader Consumer Staples Select Sector SPDR Fund (XLP) by 840 basis points, with a significant 450 basis point drop occurring in the past month.
This decline has been attributed to concerns over weaker-than-expected beer sales and uncertainty regarding potential tariffs related to the outcome of the U.S. election.
Investor sentiment has reportedly mirrored the recent stock price movement, with worries about a slowing or uncertain fundamental backdrop overshadowing what is perceived as an attractive entry point relative to historical averages. UBS believes that the upcoming earnings report is unlikely to significantly change the ongoing debate about the company's performance and does not consider it a major catalyst in either direction.
Despite the recent underperformance and investor caution, UBS suggests that the current valuation of Constellation Brands, which is approximately 14.8 times the next twelve months' EPS estimates compared to a five-year historical average of 19.6 times, indicates that the risk/reward ratio could still be favorable for the stock.
InvestingPro analysis suggests the stock is currently trading near its Fair Value, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of this $40.29B market cap company.
In other recent news, Constellation Brands has made significant strides in its business strategy and financial performance. The company's third-quarter fiscal 2025 results are expected to show beer depletions around 4-5%, according to Citi's analysis. The financial firm also reaffirmed its Buy rating for Constellation Brands, maintaining a steady price target of $305.00.
In an effort to streamline its portfolio, Constellation Brands announced the divestiture of its Svedka vodka brand to Sazerac, a global spirits company. This move aligns with the company's strategy to focus on the premium segment of the wine and spirits market. Analysts from Citi have expressed a positive outlook on the sale.
In terms of leadership, Constellation Brands recently appointed E. Yuri Hermida as the new Executive Vice President, Chief Growth & Strategy Officer, and Mallika Monteiro transitioned to the role of Executive Vice President and Managing Director for the company's beer brand portfolio.
However, potential tariffs on imports from Mexico could pose a significant challenge for Constellation Brands. Despite this, analysts from Roth suggest that the tariffs could serve as a negotiation starting point, the company might receive an exemption, or the brand's pricing power could absorb some of the cost increases.
Lastly, despite facing analyst downgrades from TD Cowen and BofA Securities, other firms like Bernstein maintained their positive stance on Constellation Brands, reiterating an Outperform rating and a price target of $325.00. These are the recent developments for Constellation Brands.
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