SunTrust Robinson Humphrey upgraded Constellation Brands Inc. stock to buy from neutral on Monday, and said a recent rebound in the wine business, which accounts for a third of total profits, has not been fully priced in. SunTrust analysts raised their share price target to $170 from $150, but left earnings estimates unchanged. SunTrust had downgraded ratings last April, on concerns that Wall Street was overestimating an improvement in beer margins and failing to appreciate the impact of tough comparisons on sales growth. But expectations have since become more realistic with the fiscal 2017 consensus outlook for beer growth in the high single-digits range. “The largely forgotten part of the STZ story is the Wine segment (44% total sales; 1/3 operating profits) which has underperformed the category for several years,” analysts wrote in a note. “We believe the segment has hit an inflection point in terms of growth and should also benefit from more favorable input costs in the coming quarters.” Shares were trading down 0.7%, but are up 21% in the last 12 months, outperforming the S&P 500, which has fallen 1.6% in the same period.
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