Constellation Brands, Inc. (STZ) announced upbeat earnings for its second quarter on Thursday, defying expectations amid a season of exciting financial reports. While the company’s overall performance was strong, analysts had mixed reactions, focusing on the performance of its flagship brand, Corona Extra.
Analyst Bill Chappell, who reiterated a Hold rating, reduced the price target from $265 to $255. While Constellation Brands reported net sales of $2.919 billion, slightly missing the consensus of $2.946 billion, its adjusted earnings (excluding Canopy) came in at $4.32 per share, surpassing the Street’s $4.08 per share expectation. Chappell noted that the company maintained the FY25 Sales and adjusted EPS guidance it issued earlier in September. However, he highlighted the concerning 3% contraction in Corona Extra sales during the quarter, stating, “Now that the peak summer season is over, it will likely take 6-9 months before we see if its efforts to revive the brand bear fruit.”
Other analysts offered a more optimistic outlook. Nik Modi, who maintained an Outperform rating with a price target of $308, acknowledged the beer depletions of 2.4%, missing the consensus of 3.7%, attributing the shortfall to “macro pressures and category sluggishness.” Despite this, he emphasized Constellation Brands’ successful delivery of “best-in-class volume growth.” Modi pointed to positive indicators from channel checks suggesting a strong start to the third quarter and estimated September depletions to be up around 6%. However, he expressed concern about the back half guidance, “implying an acceleration of Beer depletions and W&S (Wine & Spirits) improvement.”
Bonnie Herzog, who reaffirmed a Buy rating with a price target of $300, recognized the stock pullback following the results, attributing it partly to “investor concerns about softer-than-expected FQ2 depletions in core beer brands (+5% Modelo Especial and -3% Corona Extra).” Herzog anticipates “outsized pressures” in the third quarter due to “slower beer shipment volume growth and stepped-up marketing investments behind beer.” He acknowledged skepticism surrounding Constellation Brands’ ability to achieve mid-single-digit depletions in the back half, citing “macro pressures impacting STZ’s core Hispanic consumer (esp high unemployment in STZ’s top 5 states: CA, TX, FL, NY, IL).” However, he emphasized, “While one can debate the impact and timing of macro trends improving, what is encouraging in our view is that nothing we heard today suggests any fundamental weakness in STZ’s beer brands or the long-term opportunity.”
Bill Kirk, who maintained a Buy rating with a price target of $298, shared an optimistic view, stating that beer depletions are likely to reaccelerate in the back half and shipments should be “strong enough” for the company to deliver on its fiscal 2025 guidance. He noted that trends have already shown improvement from summer levels. Kirk further highlighted the strong profitability of the beer segment and the potential of Wine & Spirits, stating, “Meanwhile, Beer profitability remains strong and Wine & Spirits perception is below financial contribution ($564mn carrying value for annual EBITDA of ~$400mn).”
Shares of Constellation Brands rose by 0.63% to $245.21 at the time of publication on Friday.
