Is Constellation Brands Poised For An Earnings Beat?

Constellation Brands Inc. STZ, a leading international producer and marketer of beverage alcohol brands, is slated to report third-quarter fiscal 2015 results on Jan 8, before the opening bell. In the last quarter, it had posted a negative surprise of 3.5%. Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Constellation Brands has been performing well on the back of its strategy of driving long-term growth through acquisitions and expansions, its efforts to include new products in its wine and spirits businesses and the strong demand for beer. The company's top line is benefiting from the complete consolidation of the beer business, which was acquired last year.

We also remain impressed with the company's recent 50-50 joint venture with Owens-Illinois to acquire a glass plant in Nava, Mexico. Through investment in this joint venture and the acquisition of the glass plant, Constellation Brands has taken its glass sourcing strategy a step forward as it expects the facility to cater to more than 50% of the glass demand of its U.S. beer business.

Owing to its strategic endeavors, the company is witnessing robust depletion trends and increasing market share in the U.S. wine and spirits category. Moreover, the company is increasing its distribution points in retail and effectively executing its strategic merchandising initiatives, aimed at bolstering sales.

Looking forward, the company expects its growth momentum to continue. This was well reflected in its robust fiscal 2015 earnings guidance. Given the aforementioned positives along with a favorable outlook for fiscal 2015, we remain optimistic on the company's upcoming results.

Earnings Whispers?

Our proven model shows that Constellation Brands is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Constellation Brands currently has an Earnings ESP of +0.88%. This is because the Most Accurate estimate of $1.15 stands above the Zacks Consensus Estimate of $1.14.

Zacks Rank: Constellation Brands carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. Conversely, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Constellation Brands' Zacks Rank #3 and Earnings ESP of +0.88% make us confident of a positive earnings beat.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements:

PetSmart Inc. PETM has an Earnings ESP of +0.73% and a Zacks Rank #1 (Strong Buy).

Pacific Sunwear of California Inc. PSUN has an Earnings ESP of +7.69% and a Zacks Rank #1.

L Brands Inc. LB has an Earnings ESP of +1.72% and a Zacks Rank #2 (Buy).

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