In a report released today, Pablo Zuanic from Susquehanna reiterated a Sell rating on Constellation Brands Inc (NYSE: STZ), with a price target of $171. The company’s shares closed on Friday at $203.93.
Zuanic noted:
“STZ is a company guiding for ~10% medium-term EPS growth, with 4.7x leverage, and what we see as significant reinvestment risk, yet it trades at an unwarranted 25% peer premium. We could add political risk to these issues (state of the Hispanic consumer? volatile trade negotiations with Mexico?). Examples of the reinvestment risk include the approach for $26Bn market cap May last year; a record craft beer multiple paid for Ballast; and, now the $4Bn investment in the cannabis industry, worth three years of STZ FCF. While the stock’s sector premium has narrowed to ~25% on 1yF Factset EV/EBITDA (16% on P/E, but given the high leverage we do not think P/E is the right valuation tool here), we think such a premium is not justified given the above growth and risk metrics.”
According to TipRanks.com, Zuanic is a 4-star analyst with an average return of 7.3% and a 56.0% success rate. Zuanic covers the Consumer Goods sector, focusing on stocks such as Coca-Cola European Partners, Anheuser-Busch Inbev Sa, and Craft Brewers Alliance.
Constellation Brands Inc has an analyst consensus of Moderate Buy, with a price target consensus of $234.67.
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Constellation Brands Inc’s market cap is currently $38.51B and has a P/E ratio of 16.90. The company has a Price to Book ratio of 3.65.
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Constellation Brands, Inc. engages in the production, marketing, and distribution of beer, wine, and spirits. It operates through the following segments: Beer, Wine and Spirits, and Corporate Operations and Other. The Beer segment includes imported and craft beer brands.
