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Can Constellation Brands (STZ) Surprise This Earnings Season?

Zacks Equity Research

Constellation Brands Inc. (STZ) is set to report third-quarter fiscal 2014 results on Jan 8. Last quarter, it posted a 7.9% positive surprise. Let us see how things are shaping up for this announcement.

Growth Factors in the Past Quarter

Driven by consolidation of the newly acquired Crown Imports business, Constellation Brands’ net sales rose over twofold. The company’s adjusted earnings increased 35.2% year over year to 96 cents per share. Owing to its strategic endeavors, Constellation Brands is witnessing steady depletion trends and an expanding market share in the U.S. wine and spirits category. Moreover, the company is increasing its distribution points in retail and effectively executing strategic merchandising initiatives to bolster sales.

Earnings Whispers?

Our proven model does not conclusively project Constellation Brands as likely to beat earnings this quarter. A stock needs to have both positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, that is not the case here due to the following factors:

Zacks ESP: ESP for Constellation Brands is 0.00% since the Most Accurate Estimate stands at 91 cents per share, which is in line with the Zacks Consensus Estimate.

Zacks #2 Rank (Buy): Constellation Brands’ Zacks Rank #2 increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise call. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into earnings announcement, especially when the company is undergoing negative estimate revisions.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements:

American Express Company (AXP) with an Earnings ESP of +1.59% and a Zacks Rank #2 (Buy).

Dollar Tree, Inc. (DLTR) with an Earnings ESP of +2.80% and a Zacks Rank #3 (Hold).

Macy's, Inc. (M) with an Earnings ESP of +1.84% and a Zacks Rank #3 (Hold).

Read the Full Research Report on DLTR
Read the Full Research Report on AXP
Read the Full Research Report on M
Read the Full Research Report on STZ

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