© Reuters. Constellation Brands’ (STZ) ‘stubbornly high’ packaging costs remain a concern
Constellation Brands (NYSE:) was cut to Hold from Buy at Argus on Wednesday, with the firm removing its price target for the beverage company.
Analysts at Argus believe that while Constellation Brands is likely to benefit from high single-digit growth in its beer business, “stubbornly high” packaging costs, competition from craft brewers, and higher operating expenses remain a concern.
Even so, the firm still kept its long-term five-year rating at Buy.
In their overall view of the company, Argus rated the financial strength of Constellation as Medium, with the company scoring average on key tests such as debt levels, fixed-cost coverage, and profitability.
They also noted that investors in STZ shares face numerous risks, ranging from the concentrated ownership of the Sands family, to the company’s relatively high debt, and the fierce competition in the industry.