Constellation Brands faces tricky setup going into Q4 earnings report, says UBS analysts

Constellation Brands Inc (NYSE:STZ) volition study its 4th fourth net adjacent week, with UBS analysts flagging a “tricky” marketplace setup contempt what it sees arsenic improved apical enactment visibility and an charismatic valuation.

The steadfast believes that portion Constellation Brands, whose portfolio features Kim Crawford, Corona and Modelo Especial, has historically delivered upside, “we would not beryllium amazed if the people adjacent week saw a much muted absorption connected the day,” reflecting uncertainty astir capitalist expectations and management’s guidance.

UBS maintained its Q4 net per stock (EPS) estimation astatine $1.59, beneath Visible Alpha and FactSet statement of $1.74 and $1.70, respectively.

The analysts besides highlighted the imaginable caution successful fiscal 2027 guidance. “Given a volatile/uncertain backdrop, we would not beryllium amazed if management's archetypal guidance embedded accrued flexibility, particularly with a pending CEO alteration connected the horizon,” they wrote.

They expect brew margins to travel successful astir 36% to 38%, compared to anterior guidance of 39% to 40%, and task 2027 EPS of $12.09, with brew top-line maturation of 2.4% and operating nett borderline adjacent 37.5%.

For the brew segment, UBS forecasts fourth-quarter depletions down 0.5%, somewhat amended than Street expectations of -1.1%. “The spread betwixt depletions and scanner information has been somewhat nonexistent successful caller quarters, which we judge is owed to determination differences successful maturation alternatively than transmission dynamics,” they wrote.

Despite near-term volatility risks, UBS sees a compelling medium-term setup, raising its 12-month terms people to $176 from $168 connected continued gross potential, marketplace stock momentum, and events specified arsenic the World Cup. The steadfast has a ‘Buy’ standing connected the company.

Shares of Constellation Brands were small changed astatine $152 connected Thursday morning, up astir 10% truthful acold this year.

The institution volition study its Q4 net connected April 9.