Will This Price Target Increase Help Constellation Brands (STZ) Stock Today?

Story updated at 10 a.m. to reflect market activity.

NEW YORK (TheStreet) -- Citigroup (C) raised its price target for Constellation Brands (STZ) to $90 from $80 Friday.

Shares of Constellation Brands fell 0.7% to $79.54 in morning trading.

The bank maintained its "neutral" rating for the wine, beer, and spirits maker. Analyst Wendy Nicholson also raised estimates for Constellation Brands, citing higher beer growth.

"Consistent with the scanner data we had been seeing in Nielsen-tracked channels, STZ's beer segment posted robust growth once again," Nicholson wrote. "More specifically, sales were up 13.2% YoY, while depletions were up 11.6%, driven by consumer demand, sales execution and incremental marketing investments. Notably, 4Q sales growth benefitted from an easy comp of +1% in the year-ago quarter. On a channel basis, we note that depletions in draft grew over 35% for the quarter, with STZ focused on its draft opportunity having recently expanded Corona Light to over 100 distributors and 35 new markets. We note that STZ's overall gross margin came in at 42.6% (over 300 bps ahead of our forecast) largely owing to greater efficiencies in the beer segment (which more than offset some margin weakness in wine & spirits owing to higher promotional activity)."

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TheStreet Ratings team rates CONSTELLATION BRANDS as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate CONSTELLATION BRANDS (STZ) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, reasonable valuation levels, solid stock price performance and compelling growth in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • STZ's very impressive revenue growth greatly exceeded the industry average of 4.0%. Since the same quarter one year prior, revenues leaped by 88.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 84.48% and other important driving factors, this stock has surged by 75.57% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, STZ should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Beverages industry and the overall market, CONSTELLATION BRANDS's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Beverages industry. The net income increased by 92.7% when compared to the same quarter one year prior, rising from $109.50 million to $211.00 million.
  • You can view the full analysis from the report here: STZ Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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