Analysts recommend buying Constellation Brands despite industry slowdown, predicting profit acceleration

From CNBC: 2024-05-20 15:41:46

Wall Street research firms are calling Constellation Brands a buy, despite concerns over weak industrywide beer depletions and a possible slowdown in April due to bad weather. Analysts expect depletions for Constellation to rise 7% this year and believe in its ability to meet fiscal 2025 guidance. Shares down 4% YTD. Wells Fargo urges investors to buy the stock at a discount, seeing potential for profit acceleration. They have a $300 price target, as do The Club analysts.

Constellation Brands is down 4% since reporting positive Q4 earnings and guidance but remains about 8% from its all-time high. Wells Fargo insists on buying the “depletion miss” dip, citing consistency in the company’s depletion algorithm over the past decade and underestimation of profit growth potential. They believe the wine and spirits business is a diminishing concern, estimating it will be less than 10% of fiscal year 2025 profit, compared to 27% in FY2019.

Constellation Brands CEO plans to improve the struggling wine and spirits division by focusing on critical brands and better execution, aiming to enhance profits. Elliott Management holds a significant stake and is working with the company, prompting speculation on future strategic moves. Wall Street remains confident in Constellation’s long-term potential, despite short-term concerns about depletions and weather impacts. The next update will come at the Bernstein Strategic Decisions Conference on May 29.



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