Constellation Brands stock is the IBD Stock Of The Day as it tests support below a buy point amid rising demand for premium beers and wines — and CBD drinks.
Constellation Brands owns the Corona, Modelo and Pacifico beer brands. Its wine and spirits portfolio includes Svedka vodka and Woodbridge wines.
The portfolio of higher-margin alcohol brands positions Constellation as the No. 1 premium beer supplier in the U.S. and the No. 2 wine supplier.
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Premium Beers — And CBD — For STZ
Consumers whose habits embrace the beer, wine and spirit categories spend more than double on their average alcohol purchases than those who drink beer or wine alone, the company said in a recent presentation.
In addition, the trend has been for drinkers to trade up to brands that offer a "unique and differentiated experience" at higher price points, Constellation says. So its brands, including Corona, have diversified into craft beers, hard seltzers, boxed ready-to-drink cocktails, tropical fruit-flavored malt beverages and more.
Constellation Brands sees cannabis-infused drinks as a growth opportunity, after its hefty investment in Canopy Growth. Canopy partnered on the new Karma Water, which reportedly uses a CBD distillate.
A consumer staples stock like the owner of Corona brand can cushion portfolios in a tough stock market, like the current one.
Constellation Brands Stock Technical Analysis
Shares of Constellation Brands eased 0.3% to 245.22 on the stock market today. Constellation Brands stock peeked above a 258.10 buy point from a cup base in April but has since dropped back below the entry.
The pullback stopped at 6%, short of triggering the automatic sell rule. So far, STZ stock continues to hold support at its short-term 21-day moving average. That means the 258.10 entry remains in play. New purchases are for now off the table during the stock market's current correction.
Investors may want to put Constellation on a watchlist, set sights on a lower-risk, high-handle entry at 261.62 and wait for the market to confirm a new rally.
While STZ stock edged lower Thursday, its relative strength line continued to punch to new highs. In fact, the RS line has risen to a 2-year-plus high though it remains below all-time highs, according to MarketSmith chart analysis. A rising RS line means that a stock is outperforming the S&P 500.
Constellation Brands stock earns a superior IBD Composite Rating of 92. The Comp rating combines key fundamental and technical metrics in a single easy-to-use score.
In addition, Constellation Brands stock shows a strong Relative Strength (RS) Rating of 91 out of 99, meaning it has outperformed 91% of all stocks in IBD's database over the past year.
The alcoholic beverages industry group ranks a strong No. 26 out of 197 industry groups tracked by IBD. Molson Coors ranks No. 1 out of 19 stocks in this group.
Constellation Brands Earnings And Fundamental Analysis
The Corona brand owner earns an EPS Rating of 80 out of 99.
In April, Constellation Brands reported a 30% earnings rebound in its fiscal fourth quarter, ended February, on an 8% sales gain, the best growth in five quarters.
"Despite various headwinds, we extended our leadership position in the high end of the U.S. beer market … and we've set a strong foundation for future growth," CEO Bill Newlands said in an earnings release.
Wall Street expects more double-digit gains ahead.
Analysts polled by FactSet forecast Constellation earnings to rise 10% in fiscal 2023 and a further 15% in 2024. That would represent a sharp jump from Constellation earnings growth of just 2% in fiscal 2022.
Beer drove 2022 results and the company plans big expansion in the segment. The investment in Canopy, starting in November 2017, has weighed on results.
STZ stock shows zero quarters of rising fund ownership, according to the IBD Stock Checkup tool. However, 1,821 funds owned Constellation Brands stock as of March 2022, up from 1,751 funds in March 2021.
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