Skip to main content

Market Overview

Analyst: Constellation Worth Buying Despite Political, ESG Risks

Analyst: Constellation Worth Buying Despite Political, ESG Risks

Constellation Brands, Inc. (NYSE: STZ) sunk nearly 30 percent in 2018, and although political and environmental threats persist, one analyst expects no further depreciation.

The Analyst 

HSBC analyst Carlos Laboy upgraded Constellation from Hold to Buy rating with a $206 price target. 

The Thesis

By most accounts, the alcoholic beverage manufacturer is navigating rough waters.

“Constellation Brands faces rising risks in its core beer business which threaten to stall much-needed capacity expansion,” Laboy said in a Friday note. 

Regional water scarcity and local protests jeopardize Constellation's brewery construction in Mexicali, the analyst said. 

The firm lacks federal water permits for the project and insists its state permits for the national resources suffice, he said. Legislation has been drafted to reprioritize water rights, which could further limit industrial access and thwart Constellation’s regional plans, according to HSBC. 

To complicate matters, a ballot initiative to block brewery construction could entangle Constellation in the region’s June gubernatorial election, Laboy said. 

“If it is seen to oppose a democratic referendum without elevated concern for community issues, it could create a damaging narrative and delay needed capacity a few years." 

The risks may already be priced into HSBC’s sum-of-the-parts bear case, and HSBC said the lingering concerns can be overcome. 

“STZ could push the reset button by processing more clean water to farmers than it uses,” Laboy said.

“It could also improve its water intensity rate, which was reported at 3.19 liters of water per liter of beer in FY17.”

An analysis of discounted cash flow suggests 28-percent upside, according to HSBC. 

Price Action

Constellation Brands shares were up 2.43 percent at $170.67. 

Related Links:

Which Beverages Stocks Will Pop? UBS Weigh In On The Sector

Macquarie Cautious On Constellation's Cannabis Investment

Latest Ratings for STZ

Feb 2021Goldman SachsReiteratesBuy
Jan 2021Morgan StanleyMaintainsOverweight
Dec 2020Wells FargoInitiates Coverage OnOverweight

View More Analyst Ratings for STZ
View the Latest Analyst Ratings


Related Articles (STZ)

View Comments and Join the Discussion!

Posted-In: Carlos Laboy HSBCAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

PBTruist SecuritiesMaintains88.0
CFRTruist SecuritiesMaintains111.0
FANGTruist SecuritiesMaintains105.0
SBNYCredit SuisseMaintains250.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at