Modelo Especial brand owner Constellation Brands reported its Q1 results early Friday as the beer behemoth benefits from recent Bud Light boycotts. STZ stock inched lower Friday following the report.
Constellation Brands Earnings
Constellation Brands' earnings rose after two quarters of year-over-year declines. Earnings climbed 9.4% to $2.91 per share on 6.4% revenue growth to $2.52 billion. Analysts polled by FactSet expected earnings of $2.83 per share on $2.47 billion in sales.
Earnings, excluding the Canopy marijuana business, rose 5% to $3.04 per share.
The company's beer operations posted double-digit net sales growth, driven by momentum from its Modelo brand.
For fiscal 2024, Constellation Brands guided earnings between $9.35 to $9.65 per share. Excluding the Canopy business, Constellation Brands expects earnings between $11.70 to $12 per share. The company sees operating cash flow ranging from $2.4 billion to $2.6 billion and free cash flow between $1.2 billion and $1.3 billion.
FactSet forecasts FY 2024 earnings of $11.66 per share on 6.1% revenue growth to $10 billion.
Constellation Brands guided beer sales growing between 7% to 9% for the year while wine and spirits sales range from a 0.5% decline to 0.5% increase.
Modelo Claims Title Of Top Beer
Modelo overtook Bud Light as the top beer in the U.S. last month, claiming 8.4% of all retail sales compared to Bud Light's 7.3%. The Anheuser-Busch brand held the crown since 2001, but boycotts caused Bud Light sales to dive following its April 1 ad with transgender influencer Dylan Mulvaney. Meanwhile, Bud Light U.S. retail sales dived 25.8% in the week ended June 17 vs. the same week last year. Modelo Especial sales climbed 8.6%.
Modelo had been gaining market share more gradually ahead of the Bud Light furor.
Constellation Brands sells Modelo in the U.S. but Anheuser-Busch's subsidiary Grupo Modelo owns the international brand license. Anheuser-Busch sold the brand to Constellation Brands in 2013 to gain regulatory approval for its Groupo Modelo acquisition.
In a research note last Thursday, Deutsche Bank said Bud Light sales may never fully recover and that could have a permanent impact on Anheuser-Busch's U.S. business. The recent stock underperformance "implies a permanent reduction in ABI's U.S. business," analyst Mitch Collett wrote. "Our proprietary survey data suggests these headwinds are likely to fade even if we do not expect the U.S. business to ever fully recover from its current challenges." Still, the firm thinks the worst of the boycotts are over and upgraded AB InBev shares to a buy rating and raised the price target to 60 euros from 59 euros.
Anheuser-Busch is primarily listed on the Euronext exchange under the ticker ABI. In the U.S., it trades in American Depositary Receipts (ADRs) under the ticker BUD on the New York Stock Exchange.
STZ Stock
Constellation Brands edged down 0.3% to 246.05 Friday following results. Shares climbed 1.8% so far this week leading up to the report.
STZ shares are trading below a 248.43 buy point for a saucer-with-handle base. The stock briefly topped that entry on June 15. Shares are testing support at their 21-day exponential moving average and trading just above their 10-day line.
While the 248.43 entry is still technically valid, investors might use the June 15 high of 250.14 as a new handle buy point.
STZ stock jumped 10.2% over the past three months but only climbed 4.3% so far this year.
BUD stock rose 2% Friday. AB InBev stock dipped 0.7% this week after dropping back below its 200-day on Friday.
Constellation Brands Recent Price Target Hikes
Wells Fargo raised its price target on STZ stock to 275 from 260 and maintained its overweight rating on Thursday, noting that Constellation Brands' portfolio is healthier, has areas of strength and a path to improve.
The raise followed a price target increase from Citi on Wednesday. The firm expects Constellation Brands to report "a solid quarter" with upside to its "on-consensus numbers" based on re-acceleration in sales scanner data and bullish commentary from management during the quarter, analyst Filippo Falorni wrote. Citi boosted its price target on STZ stock to 280 from 265 and kept its buy rating on the shares.
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