Constellation Brands (STZ) Q1 Earnings & Sales Top Estimates
Constellation Brands, Inc. STZ has reported impressive first-quarter fiscal 2024 results, wherein the bottom and top lines beat the Zacks Consensus Estimate and improved year over year. Results have gained from strength in the company’s beer business.
Comparable earnings of $2.91 per share for the fiscal first quarter grew 9% year over year. Also, it surpassed the Zacks Consensus Estimate of $2.83. On a reported basis, the company has recorded earnings of 74 cents, down 64% from the year-ago quarter. Excluding the impacts of Canopy Growth, it has posted comparable earnings of $3.04 per share, up 5% from the year-ago period.
Net sales rose 6% year over year to $2,515 million and beat the Zacks Consensus Estimate of $2,484 million.
Shares of the Zacks Rank #2 (Buy) company have risen 9.8% in the past three months against the industry’s decline of 3.3%.
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Q1 Details
The company’s sales advanced 11% year over year to 2,098.6 million in the beer business, driven by a 7.5% increase in shipment volumes and 5.5% depletion growth. Depletion volume benefited from the continued robust performances of Modelo Especial, the Modelo Chelada brands, Corona Extra, Pacifico and Modelo Oro.
The depletion volume increased 5% for Modelo Especial and about 40% for Modelo Chelada. Modelo Especial continued to be the No. 1 beer brand in the high-end category, strengthening its leadership position. It was also the largest share gainer in dollar sales in the U.S. beer category in IRI channels. Meanwhile, Modelo Chelada was the No. 1 brand in the U.S. beer market and held more than 65% share of the entire chelada category.
Additionally, depletion for Corona Extra improved 1%. The brand retained its position as the third share gainer in the U.S. beer category in IRI channels.
Sales in the wine and spirits segment declined 10% to $416.3 million in the fiscal first quarter. Sales were affected by lower shipments and depletions for the segment. The shipment volume in the wine and spirits business declined 13.2% year over year, whereas depletions dropped 6.3%. Organic sales for the segment declined 6%, including a 9.2% dip in organic shipments.
Margins
Constellation Brands' comparable operating loss was $62.5 million against the prior-year quarter’s operating income of $23.9 million.
The operating margin in the beer segment contracted 220 bps to 38% due to increased raw materials on ongoing inflationary
pressures, higher marketing spend, and increased depreciation and operating costs from brewery capacity expansions, which somewhat offset sales growth and operational and cost-efficiency initiatives.
The wine and spirits segment’s operating margin contracted 60 bps to 19%, owing to lower shipment volume and an unfavorable mix, partly negated by favorable pricing and marketing expenses, as well as reduced costs in materials and packaging.
Financial Position
As of May 31, 2023, Constellation Brands’ cash and cash equivalents were $192.5 million, with long-term debt (excluding current maturities) of $10,979.8 million and total shareholders’ equity (excluding non-controlling interest) of $8,908.2 million. The company generated an operating cash flow of $665.4 million and an adjusted free cash flow of $388.4 million as of May 31.
On Jun 29, 2023, the company announced a quarterly dividend of 89 cents per share for Class A stock. The dividend is payable Aug 24 to its shareholders of record as of Aug 10.
Constellation Brands Inc Price, Consensus and EPS Surprise
Constellation Brands Inc price-consensus-eps-surprise-chart | Constellation Brands Inc Quote
Outlook
Management has retained its view for fiscal 2024. The company expects comparable earnings of $11.70-$12 per share (excluding canopy growth impacts). It anticipates earnings of $9.35-$9.65 per share on a reported basis.
Notably, the company has reported comparable earnings of $10.65 per share and $11.40 (excluding canopy growth impacts) for fiscal 2023. On a reported basis, it has posted a loss of 11 cents for fiscal 2023.
Net sales are likely to increase 7-9% for the beer segment, with the operating income rising 5-7%. The company expects organic net sales for the wine and spirits business between down 0.5% and up 0.5%. The operating income for the segment is envisioned to grow 2-4%.
The company predicts interest expenses of $500 million for fiscal 2024, while corporate expenses are expected to be $270 million. It anticipates a comparable tax rate of 19% and 20% on a reported basis for fiscal 2024.
Constellation Brands forecasts an operating cash flow of $2.4-$2.6 billion for fiscal 2024, whereas the free cash flow is estimated at $1.2-$1.3 billion. The company plans to incur a capital expenditure of $1.2-$1.3 billion in fiscal 2024.
The company outlined plans for incremental capacity expansion in Mexico to support growth in its high-end Mexican beer portfolio. It anticipates a total capital expenditure of $4-$4.5 billion for the beer business between fiscal 2024 and 2026.
The latest expansion will support an addition of up to 30 million hectoliters of modular capacity and includes the construction of a brewery in Southeast Mexico’s Veracruz. It also targets continued expansion, and the optimization of the existing Nava and Obregon breweries.
Other Stocks to Consider
We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely Procter & Gamble PG, Nomad Foods NOMD and Celsius Holdings CELH.
Nomad Foods, currently sporting a Zacks Rank #1 (Strong Buy), manufactures and distributes frozen foods. NOMD has a trailing four-quarter earnings surprise of 8.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales suggests growth of 8% from the prior-year reported number, while earnings are likely to decline 3.4%.
Celsius Holdings currently flaunts a Zacks Rank #1. CELH specializes in commercializing healthier, nutritional functional foods, beverages and dietary supplements.
The Zacks Consensus Estimate for CELH’s current financial-year sales indicates 67.9% growth from the year-ago reported figure, and the same for EPS is expected to rise 154%. The company had an earnings surprise of 81.8% in the last reported quarter.
Procter & Gamble currently carries a Zacks Rank of 2. PG has a trailing four-quarter earnings surprise of 1.02%, on average. It has a long-term earnings growth rate of 6.1%.
The Zacks Consensus Estimate for Procter & Gamble’s current financial-year sales and EPS implies growth of 1.3% and 0.9%, respectively, from the year-ago reported numbers. The consensus mark for PG’s EPS has moved up by a penny in the past seven days.
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Celsius Holdings Inc. (CELH) : Free Stock Analysis Report
