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Constellation Brands, Inc. (STZ - Free Report) has reported second-quarter fiscal 2024 results, wherein the bottom line beat the Zacks Consensus Estimate, while sales missed. The company’s sales and earnings improved year over year. Results have primarily gained from double-digit sales and operating income growth in the company’s beer business.
Comparable earnings of $3.70 per share for the fiscal second quarter grew 17% year over year. Also, it surpassed the Zacks Consensus Estimate of $3.38. On a reported basis, the company has recorded earnings of $3.74 compared with a loss of $6.30 reported in the year-ago quarter. Excluding the impacts of Canopy Growth, it has posted comparable earnings of $3.80 per share, up 14.1% from the year-ago period.
Net sales rose 7% year over year to $2,837 million but slightly missed the Zacks Consensus Estimate of $2,850 million. Sales growth was driven by continued strength in the beer business on shipment and depletion growth, led by gains in the Modelo brand family.
Shares of the Zacks Rank #2 (Buy) company have lost 1.3% in the past three months compared with the industry’s decline of 9%.
Image Source: Zacks Investment Research
Q2 Details
The company’s sales for the beer business advanced 12% year over year to $2,392.7 million, driven by an 8.7% increase in shipment volumes and 7.9% depletion growth. Depletion volume benefited from the continued robust performances of Modelo Especial, the Modelo Chelada brands, Corona Extra and Pacifico.
The depletion volume increased 9% for Modelo Especial and more than 40% for Modelo Chelada. Modelo Especial continued to be the No. 1 beer brand by sales in the high-end category, strengthening its leadership position. It was also the largest share gainer 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 about 70% share of the entire chelada category.
Additionally, depletions for Corona Extra improved 1%. The brand retained its third position as the high-end beer brand.
Constellation Brands Inc Price, Consensus and EPS Surprise
Sales in the wine and spirits segment declined 14% to $444.1 million in the fiscal second quarter. Sales were affected by lower shipments and depletions for the segment. The shipment volume in the wine and spirits business declined 17.6% year over year, whereas depletions dropped 7.8%. Organic sales for the segment declined 11%, including a 15.3% fall in organic shipments.
Margins
Constellation Brands' comparable operating income was $967.8 million, up 10% from the prior-year quarter’s $882.7 million.
Operating income for the beer segment improved 10% year over year to $953.9 million. Meanwhile, the operating margin for the beer segment contracted 60 bps to 39.9% due to higher raw material costs, owing to the ongoing inflationary pressures, costs related to a voluntary keg product recall, and increased depreciation and operating costs from brewery capacity expansions. These costs more than offset the benefits of sales growth, pricing, and operational and cost-efficiency initiatives.
Operating income for the wine and spirits segment declined 19% year over year to $80.7 million. The segment’s operating margin contracted 110 bps to 18.2%, owing to lower shipment volume. Lower shipments more than offset the gains from lower freight and material costs, and planned efficiencies in marketing expenses.
Financial Position
As of Aug 31, 2023, Constellation Brands’ cash and cash equivalents were $83.3 million, with long-term debt (excluding current maturities) of $10,680.8 million and total shareholders’ equity (excluding non-controlling interest) of $9,390.8 million. The company generated an operating cash flow of $1,662 million and an adjusted free cash flow of $1,040 million as of Aug 31.
On Oct 4, 2023, the company announced a quarterly dividend of 89 cents per share for Class A stock. The dividend is payable Nov 17 to its shareholders of record as of Nov 3.
Outlook
Driven by progress on its operating and financial plans for fiscal 2024 and actions taken to manage interest expenses, management has raised its view for fiscal 2024. The company expects comparable earnings of $12.00-$12.20 per share (excluding canopy growth impacts) compared with $11.70-$12 per share mentioned earlier. Comparable earnings per share are anticipated to be $11.77-$11.97 for fiscal 2024. Notably, the company reported comparable earnings of $10.65 per share and $11.40 (excluding canopy growth impacts) for fiscal 2023.
Constellation Brands anticipates earnings of $9.60-$9.80 per share on a reported basis compared with $9.35-$9.65 stated earlier. On a reported basis, STZ posted a loss of 11 cents for fiscal 2023.
Net sales are likely to increase 8-9% for the beer segment, with the operating income rising 6-7%. 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 wine and spirits segment is envisioned to grow 2-4%.
The company predicts interest expenses of $460 million for fiscal 2024, while corporate expenses are expected to be $270 million. It anticipates a comparable tax rate of 19%, excluding the impacts of Canopy equity earnings. On a reported basis, it estimates a tax rate of 20% for fiscal 2024. The company expects weighted average diluted shares outstanding of 184 million at the end of fiscal 2024.
Constellation Brands forecasts an operating cash flow of $2.4-$2.6 billion for fiscal 2024, with a free cash flow of $1.2-$1.3 billion. The company plans to incur a capital expenditure of $1.2-$1.3 billion in fiscal 2024.
Other Stocks to Consider
We have highlighted three other top-ranked stocks from the Consumer Staples sector, namely Coca-Cola HBC (CCHGY - Free Report) , Barfresh Food Group (BRFH - Free Report) and Compania Cervecerias Unidas (CCU - Free Report) .
The Zacks Consensus Estimate for Coca-Cola HBC’s current financial-year sales and earnings suggests growth of 34.3% and 16.7%, respectively, from the year-ago period's reported figures.
Barfresh currently has a Zacks Rank #2. Shares of BRFH have rallied 34.3% in the past three months. The company has a trailing four-quarter negative earnings surprise of 157.1%, on average.
The Zacks Consensus Estimate for Barfresh’s current financial year’s sales suggests growth of 8.7% from the year-ago period’s reported figure. The consensus mark for the company’s loss per share has narrowed by 65.85% from the year-ago quarter’s reported loss.
Compania Cervecerias Unidas currently carries a Zacks Rank #2. Shares of CCU have declined 26.4% in the past three months.
The Zacks Consensus Estimate for CCU’s current financial-year sales and earnings suggests growth of 15% and 72.9%, respectively, from the year-ago period's reported figures.
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Constellation Brands (STZ) Q2 Earnings Beat, FY24 View Raised
Constellation Brands, Inc. (STZ - Free Report) has reported second-quarter fiscal 2024 results, wherein the bottom line beat the Zacks Consensus Estimate, while sales missed. The company’s sales and earnings improved year over year. Results have primarily gained from double-digit sales and operating income growth in the company’s beer business.
Comparable earnings of $3.70 per share for the fiscal second quarter grew 17% year over year. Also, it surpassed the Zacks Consensus Estimate of $3.38. On a reported basis, the company has recorded earnings of $3.74 compared with a loss of $6.30 reported in the year-ago quarter. Excluding the impacts of Canopy Growth, it has posted comparable earnings of $3.80 per share, up 14.1% from the year-ago period.
Net sales rose 7% year over year to $2,837 million but slightly missed the Zacks Consensus Estimate of $2,850 million. Sales growth was driven by continued strength in the beer business on shipment and depletion growth, led by gains in the Modelo brand family.
Shares of the Zacks Rank #2 (Buy) company have lost 1.3% in the past three months compared with the industry’s decline of 9%.
Image Source: Zacks Investment Research
Q2 Details
The company’s sales for the beer business advanced 12% year over year to $2,392.7 million, driven by an 8.7% increase in shipment volumes and 7.9% depletion growth. Depletion volume benefited from the continued robust performances of Modelo Especial, the Modelo Chelada brands, Corona Extra and Pacifico.
The depletion volume increased 9% for Modelo Especial and more than 40% for Modelo Chelada. Modelo Especial continued to be the No. 1 beer brand by sales in the high-end category, strengthening its leadership position. It was also the largest share gainer 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 about 70% share of the entire chelada category.
Additionally, depletions for Corona Extra improved 1%. The brand retained its third position as the high-end beer brand.
Constellation Brands Inc Price, Consensus and EPS Surprise
Constellation Brands Inc price-consensus-eps-surprise-chart | Constellation Brands Inc Quote
Sales in the wine and spirits segment declined 14% to $444.1 million in the fiscal second quarter. Sales were affected by lower shipments and depletions for the segment. The shipment volume in the wine and spirits business declined 17.6% year over year, whereas depletions dropped 7.8%. Organic sales for the segment declined 11%, including a 15.3% fall in organic shipments.
Margins
Constellation Brands' comparable operating income was $967.8 million, up 10% from the prior-year quarter’s $882.7 million.
Operating income for the beer segment improved 10% year over year to $953.9 million. Meanwhile, the operating margin for the beer segment contracted 60 bps to 39.9% due to higher raw material costs, owing to the ongoing inflationary pressures, costs related to a voluntary keg product recall, and increased depreciation and operating costs from brewery capacity expansions. These costs more than offset the benefits of sales growth, pricing, and operational and cost-efficiency initiatives.
Operating income for the wine and spirits segment declined 19% year over year to $80.7 million. The segment’s operating margin contracted 110 bps to 18.2%, owing to lower shipment volume. Lower shipments more than offset the gains from lower freight and material costs, and planned efficiencies in marketing expenses.
Financial Position
As of Aug 31, 2023, Constellation Brands’ cash and cash equivalents were $83.3 million, with long-term debt (excluding current maturities) of $10,680.8 million and total shareholders’ equity (excluding non-controlling interest) of $9,390.8 million. The company generated an operating cash flow of $1,662 million and an adjusted free cash flow of $1,040 million as of Aug 31.
On Oct 4, 2023, the company announced a quarterly dividend of 89 cents per share for Class A stock. The dividend is payable Nov 17 to its shareholders of record as of Nov 3.
Outlook
Driven by progress on its operating and financial plans for fiscal 2024 and actions taken to manage interest expenses, management has raised its view for fiscal 2024. The company expects comparable earnings of $12.00-$12.20 per share (excluding canopy growth impacts) compared with $11.70-$12 per share mentioned earlier. Comparable earnings per share are anticipated to be $11.77-$11.97 for fiscal 2024. Notably, the company reported comparable earnings of $10.65 per share and $11.40 (excluding canopy growth impacts) for fiscal 2023.
Constellation Brands anticipates earnings of $9.60-$9.80 per share on a reported basis compared with $9.35-$9.65 stated earlier. On a reported basis, STZ posted a loss of 11 cents for fiscal 2023.
Net sales are likely to increase 8-9% for the beer segment, with the operating income rising 6-7%. 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 wine and spirits segment is envisioned to grow 2-4%.
The company predicts interest expenses of $460 million for fiscal 2024, while corporate expenses are expected to be $270 million. It anticipates a comparable tax rate of 19%, excluding the impacts of Canopy equity earnings. On a reported basis, it estimates a tax rate of 20% for fiscal 2024. The company expects weighted average diluted shares outstanding of 184 million at the end of fiscal 2024.
Constellation Brands forecasts an operating cash flow of $2.4-$2.6 billion for fiscal 2024, with a free cash flow of $1.2-$1.3 billion. The company plans to incur a capital expenditure of $1.2-$1.3 billion in fiscal 2024.
Other Stocks to Consider
We have highlighted three other top-ranked stocks from the Consumer Staples sector, namely Coca-Cola HBC (CCHGY - Free Report) , Barfresh Food Group (BRFH - Free Report) and Compania Cervecerias Unidas (CCU - Free Report) .
Coca-Cola HBC currently carries a Zacks Rank #2. Shares of CCHGY have declined 8.3% in the past three months. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Coca-Cola HBC’s current financial-year sales and earnings suggests growth of 34.3% and 16.7%, respectively, from the year-ago period's reported figures.
Barfresh currently has a Zacks Rank #2. Shares of BRFH have rallied 34.3% in the past three months. The company has a trailing four-quarter negative earnings surprise of 157.1%, on average.
The Zacks Consensus Estimate for Barfresh’s current financial year’s sales suggests growth of 8.7% from the year-ago period’s reported figure. The consensus mark for the company’s loss per share has narrowed by 65.85% from the year-ago quarter’s reported loss.
Compania Cervecerias Unidas currently carries a Zacks Rank #2. Shares of CCU have declined 26.4% in the past three months.
The Zacks Consensus Estimate for CCU’s current financial-year sales and earnings suggests growth of 15% and 72.9%, respectively, from the year-ago period's reported figures.