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Constellation Looking Heavenly, Earnings on Tap

NEW YORK ( TheStreet) - While the trading week that includes Independence Day promises to be a slow one, one company reporting earnings caught my attention.

Constellation Brands (STZ - Get Report) is anticipated to report first-quarter earnings before the market opens on Tuesday, July 2.

Wall Street is expecting a brew like that from the corresponding period last year, with profits of 40 cents per share. Estimates range from 33 up to 47 cents per share. I think Constellation will have to beat by at least two cents, or the market will be disappointed. In other words, if the company doesn't post 42 cents or more, anticipate share price weakness.

Constellation makes and markets alcoholic beverages, with a portfolio across the wine, spirits and imported beer categories. Well-known brands include: Corona Extra, Pacifico, St. Pauli Girl, Black Velvet and Fleischmann's. Shares closed on Friday at $52.12.

STZ Chart STZ data by YCharts

When I started college, um, I mean after I turned 21, I couldn't help but notice posters and neon signs featuring the St. Pauli Girl, and the marketing worked. I haven't drunk a St. Pauli Girl beer in decades, but at least I tried the beer and I still remember the posters.

What's more impressive than the St. Pauli Girl to a college freshman? A stock more than doubling over the last year, signaling the best is yet to come. After Constellation reached a new 52-week high about a month ago near $55, it retraced and found support at $50.

Constellation is now ready to retest May's highs, and with a forward P/E ratio under 20, there isn't a reason why it can't extend above $60 into autumn. The average analyst target price is $58, but shareholders should expect analysts' targets to increase if the company beats this quarter.

Over the last four quarters, the company has beat estimates every time, and last quarter's result of 47 cents beat by 4%. On a per-share diluted basis, the company made 41.8 cents.

STZ Gross Profit Quarterly Chart STZ Gross Profit Quarterly data by YCharts

The stock's price appreciation is running into headwinds from revenue concerns, as well as potential investors noticing that stocks don't normally travel straight up for long without taking a break. They'll want to focus on revenue and company statements at Tuesday's post-announcement conference call to evaluate Constellation's revenue-increasing ability.
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