Constellation Brands' (STZ) call-out of a September improvement in depletions beyond the Labor Day calendar shift raises confidence in H2 expectations, RBC Capital Markets said in a Thursday note.
The company delivered a "solid" quarter even with beer depletions of negative 0.6% coming marginally below the consensus of 0.1%, the analysts said. They added that Constellation guided H2 beer operating margins to a range of 34.5% to 35.5%, down from 39.0% in Q2, mainly driven by increases in marketing costs, as well as selling, general and administrative expenses.
Constellation stated that the September recovery was "very healthy" and "broad-based," driven by continued strength in the on-premise category, performance in channels such as clubs, and improvement in markets such as California, according to the note.
Constellation reported fiscal Q2 adjusted earnings of $3.74 per diluted share on net sales of $2.63 billion, compared with analysts' consensus of EPS of $3.55 on net sales of $2.54 billion.
RBC reiterated the company's stock rating at outperform and adjusted the price target to $182 from $185.
Price: 122.28, Change: +3.89, Percent Change: +3.29