Constellation Brands' Beer Headwinds Are Cyclical, RBC Says

MT Newswires Live10-27

Constellation Brands (STZ) faces excessive market pessimism as pressures on its beer business appear "cyclical in nature" rather than permanent, RBC Capital Markets said in a report Tuesday.

The firm expects Hispanic consumer demand to "recover," premium beer sales to stabilize and lower capital spending in Mexico to improve free cash flow. Shares trade at about 11.5 times two-year forward earnings, below their 10-year average of 18.1 times, suggesting little recovery is priced in, according to the report.

An investor survey highlighted demands for stronger beer volumes, clearer cost-savings plans and share buybacks. Respondents also expressed concerns about Mexico capacity spending and showed limited appetite for acquisitions, favoring smaller deals and disciplined capital allocation.

RBC reiterated its outperform rating on Constellation Brands, with a price target of $182.

Shares of Constellation Brands were down nearly 3% in early Tuesday trading.

Price: 132.02, Change: -3.60, Percent Change: -2.65

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