Constellation Brands (STZ)
- Consensus EPS forecast for the fiscal quarter ending Feb 2023 is $1.86
- Trading at 19x 2024 EPS of $11.57
- Beer portfolio viewed as “golden child” of the industry
- Modelo Oro is potentially a positive catalyst
Constellation Brands has been a great performing growth stock benefitting from a decade long trend of market share gains with consumers moving away from the big domestics to high-end beer.
Top-line beer growth of 7% to 9% is expected in fiscal 2023 and 2024. Beer tends to be an “affordable luxury” for most consumers making it recession resistant. While imports have been the healthiest subcategory of beer, it is decelerating.
Innovation has not been a meaningful part of Constellation’s growth story so Modelo Oro, the light version of Modelo Especial, marks a change. Modelo Oro could be a positive catalyst this Spring. It’s worth noting though that light beer outsells regular beer for all large brands like Budweiser and Coors but this hasn’t been the case for imports. Imported beer customers have favored the full calorie versions over light beer so I’d keep expectations in check.
In my view, it is a “wait and see” period for Constellation Brands with persistent higher input costs and a macro economic environment that could challenge margins.
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