Argus Research analyst John Staszak upgraded the shares of Constellation Brands Inc (NYSE:STZ) from Hold to Buy with a price target of $306.

In fiscal 4Q24 ended February 30, 2024, Constellation's comparable sales rose 7% to $2.14 billion and topped the consensus estimate of $2.10 billion.

The higher sales reflected an approximately 11% increase in beer revenue to more than $1.70 billion, said the analyst.

The analyst raised the FY25 EPS estimate to $14.20 from $13.90 and set an FY26 estimate of $15.30 per share following the company's upbeat FY25 EPS outlook of $13.50-$13.80.

The analyst rated the financial strength of Constellation as Medium, the midpoint on a five-point scale.

At the end of 4Q24, cash and cash equivalents totaled $152 million, up from $134 million at the end of 4Q23.

On April 6, 2023, the company announced an 11% increase in its quarterly dividend to $0.89 per share, or $3.56 annually.

The analyst estimates a dividend of $3.96 for FY25 and $4.20 for FY26.

Investors in STZ shares face numerous risks, ranging from the concentrated ownership of the Sands family to the company's relatively high debt, noted the analyst.

Also, according to the analyst, the company faces fierce competition and, like other producers of alcoholic beverages, is subject to significant regulation.

STZ is trading at 18.6-times the analyst's revised FY25 EPS estimate, below the average multiple of 21.0 for other growing Consumer Staples companies.

However, the analyst believes that the current multiple inadequately reflects the company's prospects for strong beer sales, dividend hikes and efforts to reduce costs.

Price Action: STZ shares are trading lower by 0.83% at $260.06 on the last check Monday.

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