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Susquehanna Upgrades Constellation Brands After Shares Fall 40%

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Susquehanna Upgrades Constellation Brands After Shares Fall 40%
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Constellation Brands, Inc. (NYSE: STZ) has lost about 40 percent since early October, underperforming the market and its peers. Although the share price has recovered marginally, the downside risk appears limited, according to Susquehanna.

The Analyst

Analyst Pablo Zuanic upgraded Constellation Brands from Negative to Neutral with a $174 price target. 

The Thesis

Constellation Brands is trading below the consumer staples average, which seems unjustified given the company’s above-average core fundamentals, Zuanic said in a Monday upgrade note. 

Although Constellation Brands is unlikely to raise its guidance, the commentary scheduled for Wednesday could lend upside to the stock given the pressure it was under from October through December, the analyst said. 

Reinvestment risk continues to be a concern, Zuanic said. The beverage maker's Mexican beer business has strengthened on recent innovation, and gross margins for beer could expand at least 100 bps year-on-year, he said. 

Constellation Brands’ new product launches “appear to be gaining traction in the measured channels,” the analyst said. 

Price Action

Constellation Brands shares were trading up 2.19 percent to $170.27 at the time of publication Monday. 

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Latest Ratings for STZ

DateFirmActionFromTo
Jan 2019Morgan StanleyMaintainsOverweightOverweight
Jan 2019Wells FargoReiteratesOutperformOutperform
Jan 2019Goldman SachsUpgradesNeutralBuy

View More Analyst Ratings for STZ
View the Latest Analyst Ratings

Posted-In: beverages Pablo Zuanic SusquehannaAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

 

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