Investing

Earnings Previews: Constellation Brands, Nike

Paul Ausick

Published: June 28, 2023 10:03 am

A reported tightening of U.S. rules related to exporting advanced chips was weighing on chipmakers Nvidia and AMD, semiconductor equipment maker ASML, and chip manufacturer Taiwan Semiconductor early Wednesday. The weekly report on petroleum inventories was due later in the morning, and the Federal Reserve will release its stress tests on the country’s largest banks after markets close.

Before U.S. markets opened, General Mills reported better-than-expected earnings per share (EPS) but missed the consensus revenue estimate. Year over year, revenue rose by 2.8%. The consumer staples giant also raised its dividend by 9% and issued in-line EPS guidance for fiscal 2024. Shares traded down 4.7% shortly after Wednesday’s opening bell.

After U.S. markets close on Wednesday or before they open on Thursday, BlackBerry, Micron and Paychex are on deck to report quarterly earnings.

Here’s a preview of two companies set to report earnings late Thursday or early Friday. These are the last two notable earnings reports scheduled for release until late next week. Our preview of that one will be posted on Wednesday, July 5.

Constellation Brands

Constellation Brands Inc. (NYSE: STZ) produces, imports and sells beer, wine and spirits in the United States and other countries. With a market cap of around $45.3 billion, it is the country’s largest publicly traded alcoholic beverage stock. The stock price is essentially flat over the past 12 months, although it has posted an increase of about 6.6% for the year to date. Constellation reports results first thing Friday morning.

Modelo, the company’s best-selling beer, overtook Anheuser-Busch InBev’s Bud Light as the top-selling U.S. beer last month following consumer boycotts of Bud Light after InBev ran an ad in early April featuring transgender celebrity Dylan Mulvaney. Ironically, InBev sold the U.S. market for Modelo to Constellation in order to get regulatory approval for its 2013 acquisition of Grupo Modelo.

Of 26 analysts covering the stock, 20 have a Buy or Strong Buy rating and the other six have Hold ratings. At a recent share price of around $247.00, the upside potential based on a median price target of $273.50 is 10.7%. At the high price target of $300.00, the upside potential rises to 21.5%.

Analysts expect Constellation to report fiscal 2024 first-quarter revenue of $2.47 billion, which would be up 23.8% sequentially and by 4.7% year over year. Adjusted EPS are pegged at $2.83, up 42.9% sequentially and 6.4% higher year over year. For the full fiscal year ending in February, estimates call for EPS of $11.73, up by 10.1%, and revenue of $10.03 billion, up 6.1%.

Constellation stock trades at 21.1 times expected 2024 EPS, 18.6 times estimated 2025 earnings of $13.27 and 16.4 times estimated 2026 earnings of $15.02 per share. Its 52-week trading range is $208.12 to $261.32. Constellation pays an annual dividend of $3.56 (yield of 1.47%). Total shareholder return for the past 12 months was 1.25%.

Nike

Over the past 12 months, shares of athletic gear maker Nike Inc. (NYSE: NKE) have risen by about 2.8%, including a decline of 7.4% in the first month of the company’s August quarter. The Dow component reports quarterly results after Thursday’s closing bell.

Nike recently announced new wholesale agreements with Macy’s and Designer Brands, likely due in part to Nike’s continuing struggle to reduce its inventory. Unfortunately, neither deal will have any effect on fourth-quarter results. Two things to watch for: sales in China, which are expected to improve, and guidance for the 2024 fiscal year.

Of 37 brokerages covering Nike, 24 rate the shares at Buy or Strong Buy. Eleven more have a Hold rating. At a price of around $113.60 a share, the upside potential based on a median price target of $135.00 is about 18.8%. At the high price target of $160.00, the implied upside is 40.8%.

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For the company’s fourth quarter of fiscal 2023, revenue is expected to come in at $12.59 billion, up 1.6% sequentially and 2.9% higher year over year. Adjusted EPS are forecast at $0.67, down 15.4% sequentially and by 33.3% year over year. For the full fiscal year ending next May, estimates call for EPS of $3.90, up 20.7%, on sales of $54.25 billion, up about 6.5%.

Nike stock trades at 35.2 times expected 2023 EPS, 29.1 times estimated 2024 earnings of $3.90 and 24.7 times estimated 2025 earnings of $4.61 per share. The 52-week range is $82.22 to $131.31. Nike pays an annual dividend of $1.36 (yield of 1.22%). Total shareholder return for the past year was 4.06%.