Constellation Brands (STZ) - Get Free Report shares are trading at a discount to the S&P 500 especially considering its growth trajectory, which Cowen analysts call the best in the U.S. beer category.
Cowen has an outperform rating and $275 price target on the company and says Constellation's current price level is an attractive entry point for investors.
"STZ remains the best growth story in the U.S. beer category, with an evolving but hopefully optimized wine & spirits business, coupled with a robust capital return profile," Cowen analyst Vivien Azer said.
The firm notes that Constellation has gained an average of over 100 basis points of share in Nielsen ratings over the last three plus years.
Cowen also says that while the disruption from the Covid-19 pandemic was apparent in the company's bottom line, Constellation is now "well back on track" as the leader in rising market share in the U.S. beer sector.
Constellation has only grown its EPS at a 4% compound annual growth rate (excluding WEED) and its near-term EPS will be negatively affected by the company's wine divestiture to Gallo.
But the firm sees "ample opportunity for the company to reaccelerate EPS growth" past fiscal 2022.
That growth is expected to be driven by continued strong performance in its beer segment, better performance within wine and spirits and the exhaustion of $2 billion in share repurchases by 2024.
Constellation is currently the second market share leader in U.S. wine and has seen its earnings base transform to beer dominant since its acquisition of the rights to the Modelo beer portfolio in the U.S. in 2013.
Constellation shares were down 0.6% to $232.40 at last check in morning trading Wednesday.