Is it too risky to buy Constellation Brands shares ahead of its FQ3 results?

Written by

Updated on Sep 26, 2024

Reading time 2 minutes

Constellation Brands is one of the companies to watch this week ahead of its FQ3 results.
All eyes will be on its sales, which have been volatile despite a promising imported beer business.
The bottom line picture is also not pretty amid rising costs.

On Monday, Constellation Brands Inc. (NYSE:STZ) shares advanced slightly higher ahead of the company’s announcement of fiscal third-quarter results later this week. The company will announce its most recent quarterly results Thursday, the 6th of January.

Analysts are generally pessimistic about its upcoming quarterly report amid struggling topline and bottom line. The company’s wine business continues to be a bottleneck while rising costs are hurting earnings. However, the imported beer business is providing a glimmer of hope in an otherwise, what could be a disappointing quarter.

Is the STZ stock overvalued?

From an investment perspective, Constellation Brands shares trade at a steep P/E ratio of 85.77, making the stock too expensive for value investors.

However, analysts expect its earnings per share to surge by nearly 20% within the next 12 months, resulting in a reasonable forward P/E ratio of 21.16.

Therefore, although the stock seems too expensive after gaining nearly 20% since the 21st of September, it may still be an interesting option for long-term investors.

Technically, Constellation shares seem to be trading within an ascending channel formation in the intraday chart. As a result, the stock has since rallied deep into the overbought conditions of the 14-day RSI.

Therefore, investors could target potential technical pullbacks at about $246.40, or lower at $241.17. On the other hand, $256.19 and $261.41 are crucial resistance zones.