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Should you invest in Constellation Brands after missing earnings expectations?

By:
on Oct 6, 2021
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  • Constellation Brands shares on Wednesday edged lower after announcing its FQ2 results.
  • The company reported its most recent quarterly results before markets opened, missing earnings estimates.
  • However, it issued a better than expected full-year 2022 earnings guidance.

On Wednesday, Constellation Brands Inc. (NYSE:STZ) shares edged lower after announcing its most recent quarterly results. The company reported its fiscal Q2 earnings before markets opened, missing analyst expectations.

Its non-GAAP EPS of $2.38 was below the consensus Street estimate of $2.79. On the other hand, revenue grew by 4.9% Y/Y to $2.37 billion, $70 million ahead of estimates.

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Constellation’s adjusted gross margin rate of $51.2% was also below the average analyst expectation of 52.5%. However, the company’s full-year 2022 earnings per share guidance of $10.15 to $10.45, was better than the consensus estimate of $10.14.

Does STZ offer value for money?

From an investment perspective, Constellation Brands shares trade at a slightly steep P/E ratio of 40.48, making the stock less attractive to value investors. However, its forward P/E ratio of 18.12 could gain the attention of short term growth investors. 

Analysts expect STZ earnings per share to grow by 15.80% next year and at an average annual rate of 9.50% in the next five. However, with the company missing expectations in its most recent quarterly results, those growth projections are becoming unreliable.

As a result, it may be best to monitor its performances in the coming quarters before betting on growth.

Source – TradingView

Has STZ found trendline resistance?

Technically, Constellation seems to be trading within a descending channel formation in the intraday chart. However, the stock recently bounced back to surge closer to the trendline resistance, triggering a pullback.

Therefore, investors could target extended pullback profits at approximately $207.59, or lower at $200.78. On the other hand, if STZ completes an upward breakout from the descending channel, it could find resistance at $218.48, or higher at $227.62.

Not time to buy Constellation?

In summary, although Constellation Brands shares are down 1.70% this year, the stock continues to experience intense bearish pressure following its FQ2 earnings miss. Moreover, its current valuation multiples are not compelling, while its growth prospects could be unrealistic.

Therefore, with shares yet to hit oversold conditions after the recent pullback, the downward movement seems poised to continue.