Constellation Brands (STZ) has posted mixed results for the second quarter (ended August 31) of fiscal 2022, which topped revenue estimates but lagged earnings expectations. Markedly, the U.S. producer and marketer of beer, wine and spirits provided upbeat guidance for fiscal 2022 on the back of a strong core beer business.
Adjusted earnings, excluding canopy, decreased 13% to $2.52 per share on a year-over-year basis and missed the Street estimates of $2.77 per share.
On the positive side, net sales jumped 5% to $2.37 billion and surpassed analysts’ expectations of $2.3 billion.
The company’s beer business reported a 14% year-over-year growth in net sales, while wine and spirits declined 18% during the quarter. (See Constellation Brands stock charts on TipRanks)
The company has repurchased 6.2 million shares of common stock for $1.4 billion through September of fiscal 2022.
Constellation Brands CEO Bill Newlands commented, “The strong performance of our core Beer Business, driven by robust consumer demand for our iconic brands, gives us confidence to increase our guidance for the year.”
For fiscal 2022, the company now projects adjusted earnings to be in the range of $10.15 per share to $10.45 per share versus the consensus estimate of $10.03 per share. The outlook assumptions include beer net sales growth of 9% to 11% and wine and spirits net sales decline of 22% to 24%, among others.
Markedly, over the long term, the company has planned investments to increase capacity in Mexico to support the expected future growth of the core, high-end Mexican beer portfolio. Therefore, annual capital expenditures for the beer business are likely to be in the range of $700 million to $900 million.
Recently, Truist Financial analyst Bill Chappell decreased the stock’s price target to $213 from $240 and maintained a Hold rating ahead of the company’s fiscal second-quarter results.
Noticing the dismal performance of the stock over the past three months, compared to its beverage peers, Chappell said that the quarterly performance and the company’s comments are not expected to change investor sentiment.
The rest of the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 5 Buys and 2 Holds. The average Constellation Brands price target of $260.43 implies 23.1% upside potential to current levels. Shares have gained 16.6% over the past year.
Investors should always be aware of the risks involved in any stock. According to the new TipRanks’ Risk Factors tool, Constellation Brands is at risk mainly due to three factors: Finance and Corporate, Legal and Regulatory, and Ability to Sell, which contribute 24%, 20% and 20%, respectively, to the total 25 risks identified. Under the Finance and Corporate risk category, STZ has identified six risks, details of which can be found on the TipRanks website.
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