Shares of Constellation Brands (STZ) fell in after-hours trading after the firm reported solid fourth-quarter results, which beat expectations on both earnings and revenue. The company posted adjusted EPS of $1.90, coming in $0.19 above estimates, while revenue reached $1.92 billion, down 11% year-over-year but still ahead of forecasts. However, the beverage company is dealing with changing consumer trends.
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Specifically, lower alcohol consumption is being driven by health concerns and declining interest among younger consumers. In response, Constellation has already shifted its focus more toward beer by selling off several wine brands, as wine has been hit harder by these trends. Even so, beer still makes up about 91% of total sales, and while brands like Modelo remain strong, the overall category is showing signs of slowing growth.
Outlook
Looking ahead, the company’s outlook raised concerns. Constellation expects its beer sales, adjusted for volume, to range between a 1% decline and 1% growth this year. This is below analyst expectations of about 2.2% growth, suggesting demand is still weaker than hoped. Although this is an improvement compared to last year, it indicates that even strong brands like Modelo and Corona are not fully immune to the broader slowdown in alcohol consumption.
Is STZ Stock a Good Buy?
Turning to Wall Street, analysts have a Hold consensus rating on STZ stock based on nine Buys, five Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average STZ price target of $170 per share implies 13.1% upside potential.
