Key Highlights

  • STZ shares are trading down 3.34% to $131.09, against a prior close of $135.62.
  • RBC Capital reiterated Outperform with a $182 target, arguing the market is too pessimistic.
  • RBC says the stock trades at about 11.5 times two-year forward Earnings versus an 18.1 times 10-year average.
  • The ex-dividend date for the $1.03 Dividend is October 30, and AB InBev reports earnings October 29.
  • Weak beer demand, GLP-1 concerns and a pullback in alcohol peers pressure sentiment.

Losing Streak Continues Despite an Analyst Defense

Constellation Brands (NYSE:STZ) shares are trading down 3.34% to $131.09 for a third straight session, even as RBC Capital reiterated an Outperform rating and a $182 price target. RBC argues the market is too pessimistic and that beer headwinds are cyclical, with Hispanic consumer Demand expected to recover and premium beer expected to stabilize.

RBC also expects lower Mexico Capital Expenditure to lift free cash flow, with the stock near 11.5 times two-year forward earnings versus an 18.1 times 10-year average. Shares opened at $134.19 and traded between $130.54 and $134.34 on Volume of about 1.11 million shares.

Constellation Brands, founded in 1945 and headquartered in the Rochester, New York area, is a leading U.S.-based producer, importer and marketer of beer, wine and spirits. It holds the exclusive and perpetual U.S. license to import, market and sell Corona and Modelo, and imported Mexican beer, including Modelo Especial, Corona Extra, Pacifico and Victoria, drives the large majority of its sales and profit.

Weak Beer Demand and GLP-1 Worries Weigh on Sentiment

Sentiment remains pressured by weak beer demand, GLP-1 concerns flagged by a European brewer, and a broad pullback in alcohol peers after last week's rally. Consumer defensives are also lagging as tech leads the market.

Dividend and Peer Earnings Are Near-Term Catalysts

The ex-dividend date for the $1.03 quarterly dividend is October 30, and Anheuser-Busch InBev (NYSE:BUD) reports earnings on October 29. Constellation has a Dividend Yield of 3.13%.

Valuation Offers a Cushion, but Momentum Is Weak

The company has a market cap of $22.18 billion and EPS of $12.02, and the 52-week range runs from $110.60 to $168.60. Its premium wine and craft spirits portfolio includes Kim Crawford, The Prisoner, Robert Mondavi, Casa Noble and High West, sold mainly through the U.S. three-tier distribution system under CEO Nicholas Fink. The net takeaway is that valuation support is not yet offsetting weak demand sentiment.