Home > Is it safe to buy Constellation Brands after consolidating most of 2021?

Is it safe to buy Constellation Brands after consolidating most of 2021?

Constellation Brands (NYSE:STZ) is one of the first companies to report its quarterly earnings next year. Investors expect EPS of $2.84 on the quarter.

Early next year, Constellation Brands reports its Q3 FY2022 earnings. More precisely, on December 6, at 10:30 AM EST, the earnings conference call begins.

The market participants expect EPS of $2.84 on the quarter, and the annual revenue estimate for the fiscal period ending February 2023 is $9.3 billion. Constellation Brands has beaten up on revenue for the past five quarters but missed on EPS in the last two.

This is a dividend-paying company with a forward dividend yield of 1.25% and a five-year dividend growth rate of 14.95%. It pays a quarterly dividend, and the dividend payout ratio is 30.29%.

How about the technical picture?

The stock price mostly consolidated in 2021, as seen in the chart below. It is up 11.41% YTD but consolidates near the highs. Moreover, the horizontal pattern resembles a bullish flag formation, pointing to more upside in the period ahead. A clear break of $250 should trigger more upside. On the flip side, a drop below $200 would invalidate the bullish scenario.

What do analysts say about Constellation Brands' stock price?

Most analysts are bullish, as reflected by the number of analysts issuing buy ratings. Out of the 52 analysts that monitor the company, 33 have buy ratings, 18 have neutral ones, and 1 has issued a sell rating.

Most recently, Constellation Brands' stock price was upgraded to buy at HSBC with a price target of $262 and the highest price target among analysts is $305.

The company operates with a gross profit margin of 53.38%, much higher than the 34.56% sector median. Also, the EBIT margin (TTM) exceeds the sector median by a whopping 232.5%, making the stock price attractive.

Speaking of valuation, Constellation Brands is relatively expensive if we consider the P/E Non-GAAP (TTM) ratio of 25.37. It exceeds the sector median by 25.65%, and it likely is one of the reasons why the stock price underperformed in 2021.

With a market capitalization of $45.64 billion, Constellation Brands has an enterprise value of $56.44 billion and employs 9,300 people.

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