Constellation Brands STZ shares have surged roughly 40% in the last week, as part of the larger market climb after its massive coronavirus selloff. STZ stock has also earned an analyst upgrade recently, which means now might be time for investors to consider buying the Corona beer maker’s stock before it reports its Q4 fiscal 2020 results on Friday, April 3.
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Constellation Brands is an alcoholic beverage giant. Its portfolio includes imported and craft beers such as Modelo Especial, Corona, and Ballast Point, along with Kim Crawford wine, SVEDKA Vodka, and much more. The popularity of non-domestic, craft beer, and wine has helped drive growth in recent years.
The company is also prepared to adapt to the quickly changing landscape that has seen hard seltzer sales explode. Constellation is rolling out its own Corona-branded hard seltzer this spring—despite the bad timing given its name. The firm hopes to compete against Boston Beer’s SAM Truly Hard Seltzer, Anheuser- Busch InBev’s BUD recently-launched Bud Light Seltzer, Molson Coors TAP Henry’s Hard Sparkling Water, and more.
Constellation in 2018 also stepped outside of the alcoholic beverage market and made a big bet on the growing legal marijuana industry. The firm in August 2018 invested $4 billion to up its stake in Canopy Growth CGC to nearly 40%. Investors should note that the deal provides Constellation warrants to lift its ownership to over 50%.
Constellation’s cannabis investment hasn’t paid off yet, but it is still early days for legalization in Canada and the U.S. continues to see more states jump on the legal recreational marijuana train. Long-term, the investment could look like a steal if things go right for the industry and Canopy.
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Constellation last week earned a solid upgrade. SunTrust analyst Bill Chappell raised his STZ rating to a “buy” and lifted his price target from $150 to $200 a share. The analyst cited a “resilient” portfolio and “strong” free cash flow generation, as well as longer-term growth possibilities.
Shares of STZ have soared 40% in the last week, from $105 a share on Monday, March 23 to its most recent closing price of $146.44 per share. This gives the stock nearly 30% room to run before it hits Chappell’s $200 price target and even more before it hits its 52-week highs.
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Looking ahead, our Zacks estimates call for Constellation’s adjusted Q4 earnings to slip roughly 12% from the year-ago period to hit $1.62 a share. On the top-line, the firm is projected to post fourth quarter revenue of $1.84 billion, which would mark 2.4% growth.
Constellation has topped our bottom-line estimates by an average of 9% in the trailing four quarters, but its recent earnings revision activity has been mixed. This helps it hold a Zacks Rank #3 (Hold). STZ also sports an overall “D” VGM score and is part of a Beverages – Alcohol industry that rests in the bottom 5% of our more than 250 Zacks industries.
STZ is set to report its results Friday. But despite the fact that the market has surged in four out of the last five trading days, and STZ is somewhat “recession-proof,” it might be best for investors to wait and see how Constellation’s actual results and guidance look.
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