Constellation Brands (STZ) is a global manufacturer and marketer of wine, spirits, and beer with a wide range of brands, including Clos du Bois, Ruffino, Robert Mondavi, Kim Crawford and SVEDKA vodka, notes John Staszak, an analyst with Argus Research.

We expect STZ to emerge from the pandemic in a position of strength as beer shipments remain solid. The company also owns the rights to brew and market Modelo Mexican beers (including Corona) in the United States.

We think that the firm has done a good job of boosting sales of Corona and Modelo in a weak economy. We also expect the company to continue to gain market share as consumers purchase alcoholic beverages for home consumption and restaurants reopen.

Including results from the company’s stake in Canopy Growth Corp. (CGC) — a Canadian marijuana producer — STZ now projects FY23 earnings of $11.20-$11.60 per share, up from a prior $11.20-$11.50 per share. The company has now posted above-consensus EPS in 33 of the past 35 quarters.

Based on management’s forecast for an acceleration in beer sales growth to 8%-10% from 7%-9%, we are raising our FY23 EPS estimate to $11.60 from $11.50. For FY24, we are keeping our estimate at $13.00. Both estimates remain above consensus and assume high single-digit growth in beer revenue.

In April 2022, the company raised its quarterly dividend by 5.3% to $0.80 per share, or $3.20 annually. The current yield is about 1.3%. Our dividend estimates are $3.16 for FY23 and $3.32 for FY24. Based on the company’s premiumization strategy and prospects for continued strength in its beer business, we think the shares can move higher.

STZ is trading at 22.1-times our revised FY23 EPS estimate, above the average of 19 for other growing Consumer Staples companies. We believe that the current multiple inadequately reflects the company’s prospects for accelerating beer sales and market share gains. As such, we are maintaining our BUY rating with a revised target price of $295.

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