Goldman Finds Six Reasons To Include Constellation Brands In Conviction List

Alcohol beverage company Constellation Brands, Inc. STZ has a path to show "faster and more profitable growth" for six reasons and investors should be buyers of the stock, according to Goldman Sachs.

The Constellation Brands Analyst: Bonnie Herzog maintains a Buy rating on Constellation Brands with a price target lifted from $255 to $275. The analyst also added the Corona parent to its Conviction List.

The Constellation Brands Thesis: Constellation should be able to grow its topline at a 7.5% compounded annual growth rate through 2026 and generate a low-double-digit average annual earnings per share growth over the same time period, Herzog wrote in a note.

Related Link: Constellation Brands CEO: 'We're Going To Take A Significant Share' Of Seltzer Market

The bullish outlook is based on six catalysts:

  1. The Modelo brand could generate an incremental $1.6 billion in sales by fiscal 2026 amid new distribution opportunities, favorable growth in the Hispanic community, new pipeline innovation and new formats.
  2. Constellation will take advantage of the hot seltzer category after early success with Corona Hard.
  3. Management has seen progress in working through recent out of stock problems as the percentage of Goldman Sachs' retail contacts that reported out of stock for Constellation was down from 67% in October to 43%.
  4. The company should be able to grow its wine and spirits business at a 4% CAGR rate through fiscal 2026 versus a 4% decline in recent years. The division is leaner after closing the Gallo wine sale and now boasts superior margins.
  5. Total operating margins could gain 285 basis points to 36.9% by fiscal 2026.
  6. A $2 billion share buyback program may have already started or will start in the near-term.

STZ Price Action: Shares of Constellation Brands were trading higher by 2.2% at $233.64.

Posted In: alcoholBeerBonnie HerzogGoldman SachsSeltzerAnalyst ColorPrice TargetAnalyst Ratings