Constellation Brands Video 08.04.21.
Constellation Brands Shares Move Lower As Earnings Outlook Disappoints
Shares of Constellation Brands found themselves under pressure after the company released its quarterly results and provided outlook for fiscal year 2022.
The owner of Corona beer brand reported revenue of $1.95 billion and GAAP earnings of $1.95 per share, beating analyst estimates on both earnings and revenue. The company declared quarterly dividend of $0.76 per share, an increase from the previous dividend of $0.75 per share. At current stock price levels, Constellation Brands yields 1.37%, so its dividend is not sufficient enough to attract yield-oriented investors.
In the fiscal year 2022, the company expects to report earnings of $6.90 – $7.20 per share compared to $10.23 per share in 2021 due to the negative impact of Canopy equity losses. On a comparable basis, earnings are projected to decline from $10.44 in 2021 to $9.97 in 2022. Analysts expected that Constellation Brands would report earnings of $10.44 in 2022, so the company’s earnings guidance was below expectations, which served as a material bearish catalyst for the stock in today’s trading session.
What’s Next For Constellation Brands?
The company’s decision to increase the dividend failed to provide any support to the stock as the market focused on weaker outlook for fiscal 2022.
Constellation Brands did well during the challenging 2020, and its shares have fully recovered after the major sell-off in March 2020. However, it looks that the stock will need additional catalysts to gain more upside momentum and get back to recent highs.
Assuming that Constellation Brands meets its adjusted earnings guidance for 2022, the stock is trading at 22 forward P/E. This is a reasonable valuation in today’s market, but it’s certainly not cheap enough to count as a value play.
Meanwhile, the lack of earnings growth may put some pressure on the company’s shares. At the same time, it remains to be seen whether the company’s guidance is too conservative and actual results will be better.
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