The recent earnings reports from Walgreens Boots Alliance (WBA) and Constellation Brands (STZ) have sparked interest in the broader market, with investors eager to understand the implications for gold prices. This Market Minute analysis explores the relationship between these companies' earnings and the price of gold, as well as the role of geopolitical tensions in shaping investor sentiment.



Walgreens Boots Alliance (WBA): A Turnaround Story

Walgreens' stock price is expected to increase by 10.50% from its current price of $11.39, according to the average target price of $12.58 by 13 analysts. The analysts' consensus is to "Hold" the stock, indicating that they believe Walgreens will perform similarly to the overall market. Walgreens' revenue and EPS are expected to increase by 2.02% and 1.55, respectively, for the current year, and by 1.60% and 1.49, respectively, for the next year. The company's revenue growth and EPS growth have been positive in recent years, with the exception of a decline in EPS in fiscal 2023. Walgreens' stock price has seen a significant increase in 2024, with a 10% jump on January 10, 2025, as the company showed "early progress" with its turnaround.



Constellation Brands (STZ): A Mixed Bag

Constellation Brands' stock price is expected to increase by 50.07% from its current price of $186.82, according to the average target price of $280.37 by 19 analysts. The analysts' consensus is to "Buy" the stock, indicating that they believe Constellation Brands will outperform the market over the next twelve months. Constellation Brands' revenue and EPS are expected to increase by 5.20% and 47.49%, respectively, for the current year, and by 6.08% and 10.59%, respectively, for the next year. The company's revenue growth and EPS growth have been positive in recent years, with the exception of a decline in EPS in fiscal 2022. Constellation Brands' stock price has seen fluctuations in 2024, with a double miss in earnings and a cut in its annual sales forecast due to subdued consumer spending on beers, wines, and spirits.



Gold Prices and Geopolitical Tensions

Geopolitical tensions can significantly impact the relationship between gold prices and the stock performance of companies like WBA and STZ. During times of geopolitical uncertainty, investors often turn to gold as a safe haven. This increased demand for gold can drive up its price, as seen in historical trends. For instance, during the 2004 tightening cycle, gold prices initially declined but eventually surged as economic conditions fluctuated, demonstrating the influence of geopolitical factors on gold's long-term trend.

Impact on STZ and WBA

Constellation Brands, the parent company of Corona and Modelo beers, can be affected by geopolitical tensions, particularly those involving Mexico, where many of its products are sourced and sold. For example, in 2024, tensions between the U.S. and Mexico led to concerns about potential trade disruptions, which could impact STZ's supply chain and sales. These geopolitical concerns can influence investor sentiment, leading to fluctuations in STZ's stock price.

Walgreens Boots Alliance, a global pharmacy-led, health and wellbeing enterprise, can be affected by geopolitical tensions through various channels. For instance, geopolitical instability can disrupt supply chains, leading to shortages or increased costs for pharmaceutical products. Additionally, geopolitical tensions can impact consumer spending, which can affect WBA's sales and profitability. For example, during periods of economic uncertainty, consumers may reduce discretionary spending, including purchases of non-essential items like certain pharmaceutical products.



Gold as a Hedge Against Geopolitical Risks

Gold's status as a safe-haven asset can also serve as a hedge against geopolitical risks. During times of major geopolitical tension, like what we're experiencing now, gold often serves as a hedge against uncertainties that come with global crises. This can lead to increased demand for gold, driving up its price and potentially benefiting companies like WBA and STZ that have exposure to gold or gold-related investments.

Conclusion

The recent earnings reports from Walgreens and Constellation Brands could potentially impact investor sentiment towards gold in various ways. Walgreens' positive earnings and turnaround hopes could boost investor confidence in the broader market, potentially leading to a decrease in demand for safe-haven assets like gold. However, if investors remain cautious due to ongoing geopolitical tensions or economic uncertainties, gold could still maintain its appeal. Constellation Brands' sales miss and forecast cut could dampen investor sentiment, leading to increased interest in safe-haven assets like gold. The impact of these earnings reports on investor sentiment towards gold depends on how investors interpret the news and the broader market conditions.