Why Constellation Brands, Inc. (NYSE:STZ) is falling

Constellation Brands, Inc.(NYSE: STZ) in the third quarter of 2017 has reported 10% growth in the revenue to $1.81 billion beating the consensus analysts’ estimates of $1.80 billion. STZ has reported the 38% growth in the earnings per share of $1.96 beating the analysts’ estimation for earnings per share of $1.71 in the 3Q 2017. Moreover, STZ has reported the 40% increase in the net income of $403 million compared to the corresponding period last year.

On the other hand, STZ shares lost over 7.1% on January 5th, 2017 (Source: Google finance). Investors were concerned about the impact of the tougher trade policies from the incoming Donald Trump administration on STZ that produces much of its beer in Mexico. There is a fear of the effect if Republican-led tax reform places additional taxes on imports. However, the company does not expect that they will be required to pay and there will be any effect on the consumer demand. There could be the possibility of net positive from the Republican tax reform.

Recently STZ has completed the acquisitions of High West for $137 million, Charles Smith for $121 million and completed the purchase of the Obregon, Mexico brewery operation from Grupo Modelo. In addition, STZ has also completed the sale of its Canadian wine business to Ontario Teachers’ Pension Plan in December 2016.

Additionally, for 2017, STZ has updated its outlook and now expects the adjusted earnings per share to be between $6.55 and $6.65, beating the analysts’ estimation for earnings per share during 2017 to be $6.46. The company was previously estimated the earnings for share for 2017 to be $6.30 and $6.45. The update is due to a lower tax rate.

In November 2016, STZ had brought a new share repurchase program of up to $1 billion of the company’s common shares, which is in addition to the company’s then-existing $1 billion share repurchase program. During the third quarter of FY 17, STZ has repurchased 2.4 million shares of common stock for $367 million.

STZ announced a quarterly cash dividend of 40 cents per share in the third quarter 2017 for its Class A common share and 36 cents per share of Class B common share and will be payable on February 23rd, 2017 to shareholders on record as of February 9th, 2017.

According to tipranks.com, 7 analysts has covered the stock while recommending a “Moderate Buy”. STZ has an average price target of $181, which is a further upside of 23.34%.

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