On Tuesday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Constellation Brands (NYSE:STZ), lowering the stock's price target from $259.00 to $256.00 while maintaining a Hold rating. The modification follows Constellation Brands' recent press release updating its fiscal year 2025 (FY25) projections, which included a downward revision of sales forecasts for its Beer and Wine & Spirits segments.
Constellation Brands now anticipates Beer net sales growth of 6-8%, a decrease from the previously expected 7-9%, and segment operating income growth of 11-12%, slightly adjusted from 10-12%. The Wine & Spirits segment is projected to see a sales decline of 4-6%, a stark contrast to the prior forecast of a slight growth of -0.5% to +0.5%. Segment profits are expected to fall by 16-18%, excluding a significant goodwill impairment loss estimated between $1.5 billion and $2.5 billion.
Despite the lower sales forecasts, the company raised the lower end of its total company earnings per share (EPS) guidance, now expecting $13.60-$13.80 for FY25, compared to the previous range of $13.50-$13.80.
This adjustment is attributed to increased productivity in the Beer segment and reduced net interest expenses, now estimated at $430 million, down from the prior range of $445-$455 million. Additionally, Constellation Brands has executed $249 million in incremental share repurchases in the second quarter of FY25.
Deutsche Bank has also revised its FY25 earnings estimates for Constellation Brands, now expecting an adjusted EPS of $13.69, consistent with the company's updated forecast. Beer sales are projected to grow by 6.3%, a decrease from the previously estimated 7.0%, while Beer segment profits are expected to see a growth of 11.3%, slightly higher than the previous 11.1% due to productivity gains.
The adjusted estimates come in the wake of NielsenIQ data indicating soft beer consumption in the latter half of August, with sales growth of approximately 2% in the weeks ending August 17 and 24.
In other recent news, Constellation Brands has been the focus of several financial institutions following significant developments. The company reported robust first-quarter earnings for fiscal year 2025, posting earnings per share (EPS) of $3.57, primarily driven by strong beer margins and reduced interest expenses. Furthermore, the company's beer portfolio marked a 57th consecutive quarter of depletion growth.
However, Constellation Brands revised its FY25 guidance, projecting a slight decrease in net sales growth for its beer business, and a more pronounced decline in the wine and spirits segment. On the governance front, the company announced the resignation of board member Judy A. Schmeling, stressing there were no disputes linked to her departure.
In terms of analyst coverage, Goldman Sachs (NYSE:GS) maintained a Buy rating with a steady target of $300, while JPMorgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) revised their targets to $307 and $280 respectively. Citi also reaffirmed its Buy rating with a constant target of $305.
InvestingPro Insights
In light of the recent adjustments to Constellation Brands' fiscal projections and Deutsche Bank's revised outlook, InvestingPro offers some additional insights. The company has demonstrated a commitment to shareholder returns, having raised its dividend for 9 consecutive years, signaling confidence in its financial stability. This is further supported by the fact that Constellation Brands' liquid assets exceed its short-term obligations, providing a cushion for operational flexibility.
From a valuation standpoint, Constellation Brands is trading at a high revenue valuation multiple, which may suggest a premium market position but also implies that investors are expecting high growth and profitability. This aligns with analysts' predictions that the company will maintain profitability this year, a forecast corroborated by a profitable performance over the last twelve months.
InvestingPro's real-time data indicates a robust market capitalization of $44.84 billion, a fair P/E ratio of 18.26, and a positive revenue growth of 5.25% over the last twelve months as of Q1 2025. These metrics, along with a healthy gross profit margin of 51.12%, paint a picture of a company with solid fundamentals, despite the recent adjustments in its sales forecasts.
For those seeking additional insights, InvestingPro provides a host of other tips, with the total number of tips available on the platform. Interested readers can explore these further at https://www.investing.com/pro/STZ for a deeper dive into Constellation Brands' financial health and market performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.