Constellation Brands (NYSE: STZ) shares have been under pressure all year, but that may be changing. The Q4 results were better than expected and point to continued consolidation of the company’s leadership position. Trading at 20X its earnings, the stock isn’t a value relative to the broad market, but it is paying a safely growing dividend while also growing the business. The takeaway from the Q4 results isn’t so much that 2022 was good, but 2023 will be better. The company’s new guidance has adjusted EPS and free cash flow above the Marketbeat.com consensus figures, which has the market moving higher. 

Constellation Brands Has a Mixed Quarter 

Constellation Brands had a mixed quarter, with revenue falling short of the Marketbeat.com consensus and earnings beating. The $2 billion in revenue is down almost 5% compared to last year and missed by a slim margin offset by margin strength. The company’s operating profit fell YOY but less than expected, leaving the adjusted EPS well above the consensus. The strength in results is driven by solid demand in the premium beer and wine portfolio, alleviating fears consumers would trade down to cheaper brands. 

The guidance is even better. The company expects adjusted EPS in the $11.70 to $12.00 range compared to the consensus of $11.80. This is expected to drive FCF of $1.2 to $1.3 billion, which is good for the dividend and growth outlook. The company increased the dividend by 11.3% this quarter, giving a forward yield of 1.6% and another increase is expected at the end of the current fiscal year. FCF will also be used to begin the next phase of expansion in Mexico: the build-out of brewery facilities to support growth in the premium beer portfolio. 

“We delivered another solid year in Fiscal 23. Our Beer Business achieved its 13 consecutive year of volume growth while maintaining best-in-class margins. The momentum of our iconic and next wave beer brands continued to drive our industry-leading growth and share gains,” said Bill Newland, CEO of Constellation Brands. 

Constellation Brands' dividend is safe despite some near-term headwinds. The company’s debt is rising due to expansion and operating capital increases, but not to the point of pressuring capital returns, and cash balances are strong. The dividend is less than 30% of earnings and well covered. 

Watch The Sell Side For Clues To Stock Direction

Analysts and institutions support Constellation Brands, although no new commentary exists since the Q4 release. The company is pegged at a Moderate Buy with a price target 12.5% above the current action. That target puts the stock at a new high for the year and is well on track to reach the current all-time high. The institutions are equally bullish, with buying outpacing selling nearly 2:1 over the past year. The institutions own about 85% of the company and growing. 

The post-release price action is mixed. The stock is moving up from recent lows near critical support but faces resistance at the 150-day moving average. If this resistance holds up it could signal a shift in institutional sentiment that could cap gains. If not, this stock should be able to move above the EMA and drift upward toward the all-time high level.