Constellation Brands, Inc. (NYSE:STZ) is heading into the earning session with expectations high that it will post better than expected numbers. Wall Street expects a year-over-year increase in revenues and earnings. The company heads into the earning session with high exposure to the beer market with small exposure to wine and spirit brands.
Earnings Expectations
Faced with a worrisome beer market owing to younger drinkers consuming less beer, the company has started streamlining some of its operations. For starters, it has started divesting cheaper wine brands starting with craft beer brand Ballast Point.
In addition, Constellation Brands has also invested heavily in new products such as Corona Hard Seltzer as it seeks to diversify its portfolio away from, traditional beers. The acquisition of cannabis company Canopy Growth all but underscores the company’s push to diversify its revenue footprint into high growth areas.
Likewise, expect, the wine and liquor company to report quarterly earnings of $2.39 a share for the quarter ending November, representing an 11% year over year increase. Revenues on the other hand are expected at $2.26 billion up 12.9% year over year.
Constellation Brands has been on a fine run the past year despite having to contend with the headwinds posed by the Coronavirus pandemic. The stock has shown momentum depicted by a 90% plus rally from 2020 lows.
Strong Fundamentals
The impressive run stems from the company’s strong fundamentals, strength in its brands, and adaption to changes in the market. Investor interest in the stock has continued to edge higher in response to robust earnings performance having registered an 11th consecutive earnings beat in Q2.
Ahead of its third-quarter earnings report, analysts at Morgan Stanley remain optimistic that the stock is a buy. Analyst Dara Mohsenlan has already initiated coverage with an overweight rating and a $240 a share price target.
According to the analysts, investor’s focus should be on the constellation beer business which looks set to surprise on the upside. Mohsenlan expects beer sales to propel constellation brands to a beat in the top and bottom-line results.