What to Expect From Constellation Brands’ Upcoming Q2 Results?

Deutsche Bank analysts shared their outlook on Constellation Brands, Inc. (NYSE:STZ) ahead of the upcoming Q2 earnings, scheduled to be announced on October 6.

As investors reevaluate exposure to growth amid a rising rate environment, the company has been increasingly penalized in the current market backdrop, arguably exacerbated by (1) fairly crowded positioning at the beginning of the market's most recent sell-off, (2) its over-indexed exposure to above-premium beer, (3) pricing power perceived as partially limited in an inflationary environment, and (4) a substantial ongoing beer capex cycle.

From a fundamental perspective, however, the company's execution in beer remains strong, aided by innovation, ample distribution opportunities, and healthy wage growth among the core Hispanic consumer, all of which should result in another high-single-digit depletions quarter.

With respect to guidance, the analysts believe investors are positioned for a "beat & raise" on beer operating profits, and as such, the analysts expect the company to at least raise the low end of its EPS outlook, though higher interest costs associated with the share reclassification may partially offset any better operating trends.