Constellation (STZ) Implied Volatility Skew Shows Slightly Bullish Ahead Of Earnings

The fiscal 2025 guidance is also expected to be affirmed. Though the beer depletions for the quarter are expected to be at roughly 4%, it is consistent with its quarterly channel checks. Constellation expects sustained momentum for beer volume and share gains for Constellation Brands for the rest of the year.

Market expect Constellation Brands (STZ) to post quarterly earnings of $4.08 per share in its upcoming report, which indicates a year-over-year increase of 11.1%. Revenues are expected to be $2.95 billion, up 4% from the year-ago quarter.

There have been a bullish crossover signal expected for STZ ahead of its earnings, this might help to look at the price target towards the higher end.

Based on 19 Wall Street analysts offering 12 month price targets for Constellation Brands in the last 3 months. The average price target is $299.65 with a high forecast of $335.00 and a low forecast of $256.00. The average price target represents a 16.29% change from the last price of $257.68.

I am expecting at least 2% increase in stock price for STZ if the earnings surprise and we have the 2025 guidance staying positive and STZ reaffirm their continued growth.

STZ have given investors quite a reasonable 7% returns on the stock price, and I believe we could be seeing a higher one as the consumer spending on alcholic beverage picked up as rate cut should help consumer to manage their budget better, plus the festive season coming in less than 2 months.

The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls.

The implied volatility for downside puts is decreasing relative to upside calls, then that suggests the market is pricing in a larger fear to a upside move.

That also indicate that we might be seeing a slightly bullish signal.

We also have some confirmation from the MACD and KDJ that STZ is having an upside momentum. That can be seen from the MACD moving uptrend after a bullish crossover.

For the KDJ, though we see a slight dip but we could be seeing a bullish reversal today (02 Oct) when market opens. Investors would be rotating from the tech stocks as they have suffered quite a bit from the Israel-Iran conflict.

I will be monitoring the price action as this might be a potential buy target ahead of its earnings result tomorrow (03 Oct).

I think STZ could be a defensive stocks which could be benefitting from the rate cut, as consumers spending on beer beverages should be increasing as their finances could ease.

Followed by the conflict in middle east, we could see a stock rotation this week and next, because investors could be avoiding conventional stocks which will be hit by this conflict, we have similar occurrence in April this year also.

Appreciate if you could share your thoughts in the comment section whether you think STZ could surprise in its earnings and stock price could be up at least 3%?

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.