In some disappointing news for investors, Constellation Brands (STZ) lowered its forecast for FY25 due to economic headwinds that have lowered demand for its alcoholic beverages. However, despite this news, shares of STZ gained in trading.
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Details of STZ’s Lowered Forecast
The company announced that it will write down the value of its wine and spirits business, resulting in a charge of up to $2.5 billion for the second quarter. This decision comes after several quarters of declining demand in the U.S. market.
Furthermore, STZ adjusted its annual enterprise net sales growth forecast, lowering it to a range of 4% to 6% from the previous 6% to 7%. This revision reflects a reduction in the stocking of wine and spirits by retailers as consumers cut back on higher-priced alcoholic beverages.
Constellation is set to report its second-quarter results on October 3 and expects to record a goodwill charge of between $1.5 billion and $2.5 billion related to its wine and spirits division. Consequently, the company lowered its FY25 earnings per share estimate to a range of $3.05 to $7.92, down from its prior outlook ofsw between $14.63 and $14.93 per share.
However, Constellation raised the lower end of its annual adjusted EPS guidance by 10 cents to $13.60 per share while keeping the upper end at $13.80. Furthermore, the company now anticipates annual net sales for its wine and spirits segment to decline by 6% to 4%. This compares to the previous forecast of -0.5% to 0.5% growth.
Is Constellation Brands a Good Stock?
Analysts remain bullish about STZ stock, with a Strong Buy consensus rating based on 15 Buys and two Holds. Over the past year, STZ has declined by around 3%, and the average STZ price target of $301 implies an upside potential of 22.2% from current levels.
