Last week saw the newest annual earnings release from Constellation Brands, Inc. (NYSE:STZ), an important milestone in the company's journey to build a stronger business. Constellation Brands reported US$8.6b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$10.23 beat expectations, being 3.8% higher than what the analysts expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Constellation Brands after the latest results.
Following last week's earnings report, Constellation Brands' 18 analysts are forecasting 2022 revenues to be US$8.53b, approximately in line with the last 12 months. Statutory earnings per share are forecast to plunge 34% to US$6.84 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$8.53b and earnings per share (EPS) of US$10.09 in 2022. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$256, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Constellation Brands analyst has a price target of US$290 per share, while the most pessimistic values it at US$216. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 1.0% by the end of 2022. This indicates a significant reduction from annual growth of 4.6% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.6% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Constellation Brands is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Constellation Brands' revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$256, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Constellation Brands going out to 2026, and you can see them free on our platform here.
You still need to take note of risks, for example - Constellation Brands has 2 warning signs we think you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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