We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Constellation Brands (STZ) Up on Q4 Earnings & Sales Beat
Read MoreHide Full Article
Constellation Brands Inc. (STZ - Free Report) posted another sterling quarter, as both earnings and sales witnessed year-over-year growth, alongside exceeding expectations in fourth-quarter fiscal 2017. While the quarter marked the company’s 10th consecutive earnings beat, Constellation Brands surpassed sales estimates for eight straight quarters now.
Results improved due to the company’s effective integration and growth of recently acquired brands, higher margins across its portfolio along with strong consumer demand. Further, strength in the company’s beer business in particular helped the beat.
Shares of Constellation Brands jumped nearly 5% in the pre-market trading session following the sturdy results. Further, this Zacks Rank #2 (Buy) stock jumped 7.7% in the last three months, faring slightly better than the Zacks categorized Beverages – Alcoholic industry’s growth of 6.6%.
Q4 Highlights
The company’s adjusted earnings for fourth-quarter fiscal 2017 rose 24% year over year to $1.48 per share, clearly outperforming the Zacks Consensus Estimate of $1.37. Reported earnings came in at $2.26 per share, up 90% year over year.
Net sales advanced 5% to $1,628.0 million, driven by strong organic sales growth. On a currency adjusted basis, organic sales grew 7%. Moreover, the top line exceeded the Zacks Consensus Estimate of $1,587 million.
Sales also benefited from strong volumes and favorable pricing at the beer business, which drove 11% sales growth at the segment. Organic net sales for the segment grew 10%.
Wine and spirits’ sales remained flat, as 4% growth in organic sale and contributions from Prisoner wine, Charles Smith and High West acquisitions were negated by the sale of the Canadian wine business.
Cost and Margin Performance
Adjusted gross profit for the quarter improved 10% year over year to $786.4 million. Adjusted gross profit margin expanded 190 basis points (bps) to 48.3%.
Constellation Brands' comparable operating income grew nearly 14% to $494.8 million with the comparable operating margin expanding 220 bps to 30.4%. This growth was backed by solid operating income improvement at both the beer (21%) and wine and spirits (6%) businesses. The beer segment gained from higher organic volume, effective pricing and lower product costs, while growth at the wine and spirits segment was attributed to organic volume growth and contributions from acquisitions. This was partly offset by greater marketing expenses (at both segments) and higher SG&A expenses.
Financial Position
Constellation Brands ended the quarter with cash and cash equivalents of $177.4 million. As of Feb 28, 2017, the company had $7,720.0 million in long-term debt (excluding current maturities) and its total shareholders’ equity was $6,884.8 million.
In fiscal 2017, Constellation Brands generated $1,696.0 million in cash from operations and free cash flow of $788.6 million, fueled by greater operating cash flows at both the segments.
Well, the company’s solid cash flows and financials provided it with the flexibility to make share buybacks and hike quarterly dividend. In fiscal 2017, the company bought back 7.4 million shares for $1.1 billion. This included the company’s fourth quarter buybacks of 5 million shares for $750 million.
Further, on Apr 5, the company raised quarterly dividend by nearly 30% to 52 cents per share for Class A and 47 cents for Class B shares. This dividend is payable on May 24, to shareholders on record as of May 10.
Fiscal 2018 Outlook
Management remains encouraged with its robust fiscal 2017 results, which along with superb cash flows enabled the company to raise dividend, make share buybacks, support acquisitions and make constant investments to facilitate business growth throughout the fiscal. Also, management remains pleased with the faster-than-expected expansion at the Nava brewery in Mexico, where it successfully concluded the next phase of its expansion plan of 25 million hectares.
Given the splendid year and ongoing momentum, management issued a fresh guidance for fiscal 2018. The company remains focused on achieving adjusted earnings per share (EPS) growth that surpasses its previously anticipated target of at least 10%. The company envisions adjusted earnings guidance in a range of $7.70–$8.00 per share. On a reported basis, EPS for fiscal 2018 are anticipated in the range of $7.65–$7.95.
Further, the company expects net sales for the beer segment to grow 9–11%. Operating income at this segment is anticipated to increase in a band of 11–13%.
Sales at the wine and spirits’ segment are projected to decline 4–6%, whereas the operating income is expected to remain flat year over year, mainly due to the impact from the sale of its Canadian wine business, partly compensated by benefits from the High West, Charles Smith and Prisoner acquisitions.
Certain other factors were taken into consideration before providing the earnings guidance. These include an interest expense expectation of $340–$350 million, an approximate tax rate of 22% and weighted average diluted shares outstanding of approximately 201 million.
The company anticipates capital expenditure for fiscal 2018 in the range of $1.175−$1.275 billion with roughly $1.0 billion estimated for expansion of Mexico beer operations.
The company’s free cash flow expectation for fiscal 2018 lies in the range of $725−$825 million. Operating cash flow is projected in the range of $1.9–$2.1 billion.
Castle Brands has surged a whopping 98.7% in the last three months.
Heineken, with long-term earnings per share growth rate of 7.6%, has jumped 13.6% in the last three months.
Conagra Brands has long-term EPS growth rate of 8%. Further, the company’s earnings have outperformed estimates by an average of 10.7% in the trailing four quarters.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Constellation Brands (STZ) Up on Q4 Earnings & Sales Beat
Constellation Brands Inc. (STZ - Free Report) posted another sterling quarter, as both earnings and sales witnessed year-over-year growth, alongside exceeding expectations in fourth-quarter fiscal 2017. While the quarter marked the company’s 10th consecutive earnings beat, Constellation Brands surpassed sales estimates for eight straight quarters now.
Results improved due to the company’s effective integration and growth of recently acquired brands, higher margins across its portfolio along with strong consumer demand. Further, strength in the company’s beer business in particular helped the beat.
Shares of Constellation Brands jumped nearly 5% in the pre-market trading session following the sturdy results. Further, this Zacks Rank #2 (Buy) stock jumped 7.7% in the last three months, faring slightly better than the Zacks categorized Beverages – Alcoholic industry’s growth of 6.6%.
Q4 Highlights
The company’s adjusted earnings for fourth-quarter fiscal 2017 rose 24% year over year to $1.48 per share, clearly outperforming the Zacks Consensus Estimate of $1.37. Reported earnings came in at $2.26 per share, up 90% year over year.
Net sales advanced 5% to $1,628.0 million, driven by strong organic sales growth. On a currency adjusted basis, organic sales grew 7%. Moreover, the top line exceeded the Zacks Consensus Estimate of $1,587 million.
Sales also benefited from strong volumes and favorable pricing at the beer business, which drove 11% sales growth at the segment. Organic net sales for the segment grew 10%.
Wine and spirits’ sales remained flat, as 4% growth in organic sale and contributions from Prisoner wine, Charles Smith and High West acquisitions were negated by the sale of the Canadian wine business.
Cost and Margin Performance
Adjusted gross profit for the quarter improved 10% year over year to $786.4 million. Adjusted gross profit margin expanded 190 basis points (bps) to 48.3%.
Constellation Brands' comparable operating income grew nearly 14% to $494.8 million with the comparable operating margin expanding 220 bps to 30.4%. This growth was backed by solid operating income improvement at both the beer (21%) and wine and spirits (6%) businesses. The beer segment gained from higher organic volume, effective pricing and lower product costs, while growth at the wine and spirits segment was attributed to organic volume growth and contributions from acquisitions. This was partly offset by greater marketing expenses (at both segments) and higher SG&A expenses.
Financial Position
Constellation Brands ended the quarter with cash and cash equivalents of $177.4 million. As of Feb 28, 2017, the company had $7,720.0 million in long-term debt (excluding current maturities) and its total shareholders’ equity was $6,884.8 million.
In fiscal 2017, Constellation Brands generated $1,696.0 million in cash from operations and free cash flow of $788.6 million, fueled by greater operating cash flows at both the segments.
Well, the company’s solid cash flows and financials provided it with the flexibility to make share buybacks and hike quarterly dividend. In fiscal 2017, the company bought back 7.4 million shares for $1.1 billion. This included the company’s fourth quarter buybacks of 5 million shares for $750 million.
Further, on Apr 5, the company raised quarterly dividend by nearly 30% to 52 cents per share for Class A and 47 cents for Class B shares. This dividend is payable on May 24, to shareholders on record as of May 10.
Fiscal 2018 Outlook
Management remains encouraged with its robust fiscal 2017 results, which along with superb cash flows enabled the company to raise dividend, make share buybacks, support acquisitions and make constant investments to facilitate business growth throughout the fiscal. Also, management remains pleased with the faster-than-expected expansion at the Nava brewery in Mexico, where it successfully concluded the next phase of its expansion plan of 25 million hectares.
Given the splendid year and ongoing momentum, management issued a fresh guidance for fiscal 2018. The company remains focused on achieving adjusted earnings per share (EPS) growth that surpasses its previously anticipated target of at least 10%. The company envisions adjusted earnings guidance in a range of $7.70–$8.00 per share. On a reported basis, EPS for fiscal 2018 are anticipated in the range of $7.65–$7.95.
Further, the company expects net sales for the beer segment to grow 9–11%. Operating income at this segment is anticipated to increase in a band of 11–13%.
Sales at the wine and spirits’ segment are projected to decline 4–6%, whereas the operating income is expected to remain flat year over year, mainly due to the impact from the sale of its Canadian wine business, partly compensated by benefits from the High West, Charles Smith and Prisoner acquisitions.
Certain other factors were taken into consideration before providing the earnings guidance. These include an interest expense expectation of $340–$350 million, an approximate tax rate of 22% and weighted average diluted shares outstanding of approximately 201 million.
The company anticipates capital expenditure for fiscal 2018 in the range of $1.175−$1.275 billion with roughly $1.0 billion estimated for expansion of Mexico beer operations.
The company’s free cash flow expectation for fiscal 2018 lies in the range of $725−$825 million. Operating cash flow is projected in the range of $1.9–$2.1 billion.
Other Stocks to Consider
Some stocks worth considering in the same industry include Castle Brands Inc. and Heineken N.V. (HEINY - Free Report) , with a Zacks Rank #2. Another stock which investors can consider from the broader consumer staples sector is Conagra Brands, Inc. (CAG - Free Report) , also with a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Castle Brands has surged a whopping 98.7% in the last three months.
Heineken, with long-term earnings per share growth rate of 7.6%, has jumped 13.6% in the last three months.
Conagra Brands has long-term EPS growth rate of 8%. Further, the company’s earnings have outperformed estimates by an average of 10.7% in the trailing four quarters.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>