January 3, 2025

Here's How Constellation Brands is Placed Just Before Q3 Earnings

business people have a meeting about company statistics

Constellation Brands, Inc. STZ is scheduled to release third-quarter fiscal 2025 results on Jan. 9. The alcoholic beverage bigwig is expected to have recorded top and-bottom-line growth in the to-be-reported quarter.

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The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings is pegged at $3.34 per share, indicating 4.7% growth from the year-ago quarter’s actual. The consensus mark has moved down a penny in the past 30 days. The consensus mark for revenues is pegged at $2.6 billion, indicating a 3% increase from the prior-year quarter’s reported figure.

In the last reported quarter, the alcohol behemoth delivered an earnings surprise of 5.1%. Its bottom line beat estimates by 5.3%, on average, over the trailing four quarters.

Constellation Brands Inc Stock Price and EPS Surprise

Here's How Constellation Brands is Placed Just Before Q3 Earnings

Constellation Brands Inc price-eps-surprise | Constellation Brands Inc Quote

What Zacks Model Says for STZ Stock

Our proven model does not conclusively predict an earnings beat for Constellation Brands this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Constellation Brands has an Earnings ESP of -0.22% and a Zacks Rank of 2.

Key Factors to Note Before STZ Q3 Earnings

Constellation Brands has been facing challenges in its wine & spirits segment, primarily due to tough market conditions across most price ranges. The company has also been dealing with increased corporate expenses, due to higher compensation and benefits costs and elevated professional fees. In the last earnings call, management projected a slight rise in these expenses in the coming quarters, largely due to higher compensation and investments in digital capabilities.

STZ also expects a modest increase in interest expenses following reduced capitalized interest from its beer business expansion in the fiscal third quarter. It anticipates a minor uptick in the effective tax rate due to greater contributions from the wine and spirits segment to overall operating income.

Despite efforts in pricing and marketing to support core brands, the company faces operating challenges, further contributing to these impairment charges. It has been witnessing higher packaging and raw material costs from continued inflationary pressures.

While the previously implemented commercial and operational initiatives have improved the performance of major brands in the wine and spirits category, additional category headwinds are affecting the near-term outlook of this segment. These pressures, combined with ongoing macroeconomic challenges, have been posing risks for this segment and are expected to result in weaker top-and-bottom-line results .

However, the company’s beer segment remains resilient, with minimal impact from broader economic conditions. Constellation Brands’ beer division is expected to have benefited from cost-saving measures and efficiency initiatives, though increased marketing investments are likely to have slightly offset these gains. This is expected to have been reflected in the beer segment’s operating income.

The company is poised for continued growth in its beer portfolio, driven by brands like Modelo Especial, Corona Extra, Pacifico and Modelo Chelada. The beer segment’s premiumization strategy, including flavored beers and seltzers, is expected to have boosted the top line in the fiscal third quarter.

STZ Stock Valuation Picture

From a valuation perspective, Constellation Brands offers an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 14.88X, which is below the five-year high of 23.57X and the Beverages - Alcohol industry’s average of 15.18X, the stock offers compelling value for investors seeking exposure to the sector.

The recent market movements show that STZ shares have lost 7.8% in the past year compared with the industry's 20% decline.

STZ Stock One-Year Price Performance

Stocks With the Favorable Combination

Here are some companies, which according to our model, have the right combination of elements to post an earnings beat this time around:

Archer Daniels Midland ADM currently has an Earnings ESP of +7.87% and a Zacks Rank of 3. The company is expected to register top-and-bottom-line decline when it reports fourth-quarter 2024 results. The Zacks Consensus Estimate for ADM’s quarterly revenues is pegged at $21.9 million, which suggests a decline of 4.9% from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here .

The Zacks Consensus Estimate for ADM’s quarterly earnings has moved down 15% in the past 30 days to $1.08 per share. The consensus mark indicates a 20.6% decline from the year-ago quarter’s number. ADM delivered a negative earnings surprise of 6.5%, on average, in the trailing four quarters.

Simply Good Foods SMPL presently has an Earnings ESP of +5.50% and a Zacks Rank of 3. The company is expected to register top and-bottom-line growth when it reports first-quarter fiscal 2025 results. The Zacks Consensus Estimate for quarterly revenues is pegged at $348.1 million, which indicates a rise of 12.8% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for quarterly earnings has moved up a penny to 46 cents per share in the past seven days. The consensus mark for SMPL’s earnings indicates growth of 7% from the year-ago quarter’s number. SMPL has delivered an earnings surprise of 5.3%, on average, in the trailing four quarters.

e.l.f. Beauty ELF currently has an Earnings ESP of +0.10% and a Zacks Rank of 3. The company is expected to register top and-bottom-line growth when it reports fourth-quarter 2024 results. The Zacks Consensus Estimate for ELF’s quarterly earnings has moved up a penny in the last 30 days to 77 cents per share. The consensus estimate for earnings indicates 4.1% growth from the year-ago quarter's number.

The Zacks Consensus Estimate for e.l.f. Beauty’s quarterly revenues is pegged at $327.6 million, implying a rise of 20.9% from the figure reported in the prior-year quarter. ELF has delivered an earnings surprise of 45.1%, on average, in the trailing four quarters.

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