Constellation Brands' share price is expected to remain range-bound amid sluggish beer volumes that are driving a decelerated growth rate, as indicated by BofA Securities in a recent report. The brokerage has downgraded Constellation Brands, the parent company of popular brands Modelo and Corona, from a 'buy' rating to 'neutral', adjusting its price target downward to $255 from a previous $300.
As a result, shares of Constellation Brands saw a decline of 1.9% during afternoon trading sessions. Analyst Bryan Spillane pointed out that while the current macroeconomic climate has an impact, it is essential to acknowledge that the muted growth of beer volumes signifies broader market trends. He noted that volumes are anticipated to continue on a subdued path throughout the remainder of the year, indicating that the stock will likely remain within a stable trading range. Last week, Constellation Brands reported revenue growth that fell short of expectations, registering a modest 3% increase to $2.92 billion.
Beer revenue showed a 6% increase, however, both category depletions and volume growth are cooling year over year, transitioning from previous rates of 12% and 7.9% to current rates of 2.4%. BofA Securities has revised its fiscal 2025 beer depletion forecast down to 4.5% from 4.8%, which now trails the industry consensus estimate of 5.2%.
The report suggests that this revision is due to challenging comparisons with the same period in fiscal 2024 and a decrease in consumer spending power. Furthermore, BofA has maintained its earnings-per-share estimate for the current fiscal year at $13.77, reflecting a year-over-year growth rate of around 14% and standing above the consensus estimate of $13.69.
However, revenue expectations have been trimmed slightly from $10.4 billion to $10.35 billion. Spillane also highlights that BofA has lowered the sales growth projections for fiscal years 2026 and 2027. EPS targets for these years have been adjusted down as well, going from $15.36 and $17.19 to $15.19 and $16.83, respectively.
In more technical terms, while the current stock price sits at $241.09, it reflects a change of -5.58, marking a percentage decrease of -2.26..