Constellation Brands (STZ) Q3 Earnings: A Beat in Store?

We expect beverage-alcohol bellwether, Constellation Brands Inc.STZ to beat expectations when it reports third-quarter fiscal 2017 results on Jan 5, 2017. Last quarter, the company had delivered a positive earnings surprise of 6.6%. In fact, it has outperformed the Zacks Consensus Estimate by an average of 5.8% over the trailing four quarters.

CONSTELLATN BRD Price and EPS Surprise


The company's solid earnings history has also helped it to outperform the Zacks categorized Beverages - Alcohol industry on a year-to-date basis. This is evident from Constellation Brands' improvement of 5.9% year-to-date, when the industry was actually down by 5.3%. So, let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Constellation Brands may beat earnings because it has the right combination of the two key components.

Zacks ESP: Constellation Brands currently has an Earnings ESP of +1.18%. This is because the Most Accurate estimate stands at $1.72, while the Zacks Consensus Estimate is pegged lower at $1.70. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Constellation Brands carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

The combination of Constellation Brands' Zacks Rank #2 and positive ESP makes us reasonably confident of a positive earnings beat.

What's Driving the Better-than-Expected Earnings ?

Constellation Brands' top and bottom line have been benefiting from strength in the beer business, improving trends at its wine and spirits business, and solid overall depletion trends. Further, the company's strategy of boosting growth via acquisitions and its efforts to include new products in its wine and spirits businesses have been major growth drivers. These factors, along with solid demand for beer, assisted the company to post its eighth and sixth straight earnings and sales beat, respectively in the last reported quarter. The company also raised its fiscal 2017 outlook, on the back of its robust future prospects. All these factors make us reasonably confident of the company's upcoming results.

Other Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

First Horizon National Corporation FHN , scheduled to report earnings on Jan 13, has an Earnings ESP of +4.00% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Citigroup Inc. C , slated to report earnings on Jan 18, has an Earnings ESP of +1.82% and a Zacks Rank #2 (Buy).

Coach, Inc. COH , expected to report earnings on Jan 24, has an Earnings ESP of +2.70% and a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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