J.P. Morgan Previews Constellation Brands' FQ4, Maintains Neutral (STZ)

Earlier today, J.P. Morgan came out with a note previewing Constellation Brands' FQ4 (NYSE: STZ). STZ will report FQ4 EPS tomorrow before the market opens. J.P. Morgan maintains Neutral and forecasts the FQ4 EPS at $0.26, in line with Bloomberg consensus.

During FQ3, STZ anticipates EPS for FY12 to be slightly above FY11 guidance. In tomorrow's report, STZ should also provide EPS guidance for FY12. JP Morgan is forecasting FY2012 EPS at $1.85, vs. $1.89 Bloomberg consensus.

Although category trends are improving, analysts are still concerned about the lagging sales and volume trends. Nielsen supermarket trends for STZ's portfolio have shown under-performance vs. category. STZ also began to increase prices exceeding the category average. In addition, sales are expected to be down in the 1 to 2% range. Australian and UK business segments represent about 25% of total sales, but STZ will not have one month's worth of revenue from these segments, because the sales closed on January 31st. Despite weak scanner data, STZ wine sales should be up against easy competition.

Some downside risks associating with the Neutral rating include further disruption in sales and pronounced share loss in Corona. Upside risks associating with the rating include a considerable improvement in wine sales, improvement in volume results in higher-priced wines, and a solid growth in Corona.

J.P. Morgan sets the price target for year end at $21, 11x of FY12 estimates. At the time of posting, shares of STZ were trading at $20.38.