02:59 PM EDT, 09/03/2024 (MT Newswires) -- Constellation Brands' ( STZ ) fiscal second quarter is tracking below previous expectations amid deteriorating industry dynamics, RBC Capital Markets said on Tuesday.

The brokerage lowered its revenue target for the August quarter to $2.95 billion from $3.01 billion and its adjusted earnings per share outlook to $4 from $4.07. Five analysts surveyed by Capital IQ are on average modeling for revenue of $2.96 billion.

Beer volume is now expected to have grown 4% during the quarter, down from RBC's prior forecast of 6% growth, as weather has "skewed negative for beer consumption," wrote Nik Modi, co-head of RBC's global consumer and retail research.

Wine and spirits volumes likely declined by 4%, versus the brokerage's previous expectation for a 2% dip, as "overall category dynamics have deteriorated over the last few months," Modi said. Svedka and Woodbridge are dragging on volume growth while faster-growing brands such as Kim Crawford and Meiomi are also under pressure, he said.

Constellation Brands ( STZ ), which owns the brand license for Corona and Modelo in the US, is scheduled to report results for the second quarter on Oct. 3.

RBC trimmed its fiscal 2025 revenue forecast to $10.52 billion from a prior view of $10.58 billion and its EPS estimate to $13.62 from $13.70. The Capital IQ-polled consensus is for revenue of $10.51 billion in the ongoing year.

However, Modi reiterated an outperform rating and a $308 price target on the stock. He said Constellation Brands' ( STZ ) market share gains in beer remain solid. Shares of Constellation Brands ( STZ ) rose 2.6% in Tuesday trade.

The expected 4% beer volume growth in the second quarter is "substantially better than almost all consumer staples companies and significantly better than the overall beer category," he said.

The company can likely achieve a compound annual growth rate for its beer topline in the 7% to 9% range over the next three years, according to RBC Capital Markets.

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