Constellation Brands, Inc. (STZ) shares surged on Tuesday after the company revised its fiscal year 2025 (FY25) financial outlook. While acknowledging macroeconomic headwinds, the company remains optimistic about its core businesses.
Constellation Brands adjusted its comparable EPS forecast for FY25 to a range of $13.60 to $13.80, slightly higher than its previous projection of $13.50 to $13.80. This revision comes despite the company’s anticipation of a significant non-cash goodwill impairment loss of $1.5 billion to $2.5 billion for its Wine and Spirits division in the second quarter of FY25. This impairment loss, factored into the revised reported EPS outlook, is expected to result in a range of $3.05 to $7.92 for FY25 reported EPS.
The company also revised its Enterprise net sales growth forecast to a range of 4% to 6%, down from its previous projection of 6% to 7%. This revision reflects the impact of rising unemployment and prolonged inventory destocking in wine and spirits markets. Despite these challenges, Constellation Brands remains confident in its beer business, updating its Beer net sales growth forecast to 6% to 8% (from 7% to 9% prior). However, the Wine and Spirits net sales outlook was revised to a negative range of 6% to 4%, a significant shift from the previous forecast of 0.5% to 0.5%.
“While ongoing macroeconomic headwinds, particularly rising unemployment, have led to a recent deceleration in the rate of growth of consumer demand for our products, we are on track to deliver a solid mid single-digit volume increase this fiscal year for our Beer Business,” said Bill Newlands, President and Chief Executive Officer of Constellation Brands. He further highlighted that the company has witnessed notable volume growth in states where its beer business accounts for a majority of its sales.
The CEO also emphasized the positive impact of earlier initiatives on major brands within the Wine and Spirits sector, despite ongoing category challenges. Despite these headwinds, Constellation Brands has outpaced the CPG sector growth in dollar sales and its Beer Business has achieved significant gains, including being the top dollar share gainer in its category and the third largest in the Beverage industry.
RBC Capital analyst Nik Modi reaffirmed Constellation Brands with an Outperform rating and maintains a $308 price target. STZ shares closed at $248.12 on Tuesday, up 3.08%.
