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Constellation Brands (STZ) Rises on Q1 Earnings Beat, Solid View

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Constellation Brands, Inc. (STZ - Free Report) reported first-quarter fiscal 2025 results, wherein the bottom line beat the Zacks Consensus Estimate and improved year over year. However, the company’s net sales marginally missed the consensus mark. Results primarily benefited from the continued strong performance of the beer business and an improved operating margin.

Comparable earnings of $3.57 per share improved 17% year over year in the fiscal first quarter and beat the Zacks Consensus Estimate of $3.46. On a reported basis, the company reported earnings per share of $4.78, up significantly from 74 cents earned in the year-ago quarter.

Net sales increased 6% year over year to $2.66 billion but missed the Zacks Consensus Estimate of $2.67 billion. Sales growth was driven by continued strength in the beer business on solid volume growth and strong demand across most of its portfolio.

Following the strong results, shares of Constellation Brands rose 3.5% in the pre-market trading session on Jul 3. Shares of this Zacks Rank #3 (Hold) company have risen 7.1% in the year-to-date period against the industry’s decline of 13.8%.

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Q1 Details

Constellation Brands' sales for the beer business advanced 8% year over year to $2.3 billion, backed by a solid 7.6% increase in shipment volumes and 6.4% depletion volume growth. Depletion volumes were aided by robust demand for most of its brand portfolio, led by strength in the Modelo Especial, Pacifico and Modelo Chelada brands.

The depletion volume increased by 11% for Modelo Especial, 21% for Pacifico and more than 5% for Modelo Chelada. However, depletions declined more than 1% for Corona Extra.

Sales in the wine and spirits segment declined 7% to $389 million in the fiscal first quarter. Sales were affected by a 5.1% decrease in shipment volumes and a 12.7% fall in depletions. The soft volumes mainly stemmed from challenging market conditions, particularly in the U.S. wholesale channel for most price segments in the wine category.


Constellation Brands' comparable operating income was $924 million, up 12% from the prior-year quarter. The growth was driven by robust operating income in the beer business, offset by a decline in the wine and spirits segment.

Operating income for the beer segment improved 16% year over year to $923 million. The operating margin for the beer segment expanded 260 bps to 40.6% due to fixed cost absorption led by sales growth, gains from ongoing cost-saving initiatives, and timing and efficiencies in marketing investments. This was partly negated by the adverse currency rate and higher depreciation from brewery capacity expansion.

Operating income for the wine and spirits segment declined 25% year over year to $59.7 million. The segment’s operating margin contracted 370 bps to 15.3%, as gains from lower SG&A and marketing expenses were more than offset by lower volumes and higher COGS.

Financial Position

As of May 31, 2024, Constellation Brands’ cash and cash equivalents were $73.8 million, long-term debt (excluding current maturities) was $10.7 billion, and total shareholders’ equity (excluding non-controlling interest) was $10.6 billion. The company generated an operating cash flow of $690.5 million and an adjusted free cash flow of $315.2 million as of May 31.

STZ’s board announced a quarterly dividend of $1.01 per share for Class A stock on Jul 2, 2024. The dividend is payable on Aug 23 to its shareholders of record as of Aug 14.


Constellation Brands revised its reported EPS outlook for fiscal 2025. Management anticipates an enterprise net sales increase of 6-7% for fiscal 2025, with 7-9% sales growth for the beer segment. Meanwhile, sales for the wine and spirits segment are expected to be between a decline of 0.5% and growth of 0.5%.

The company anticipates enterprise operating income to increase 10-12% for fiscal 2025, while the comparable operating income is expected to rise 8-10%. The company expects operating income to improve by 10-12% for the beer segment and decline by 9-11% for the wine and spirits segment. Corporate expenses are expected to be $260 million for fiscal 2025.

The company envisions comparable earnings of $13.50-$13.80 per share for fiscal 2025. It raised its reported fiscal 2025 EPS view to $14.63-$14.93 compared with $13.40-$13.70 mentioned earlier. It reported comparable earnings per share of $12.38 and reported EPS of $9.39 in fiscal 2024.

Constellation Brands predicts interest expenses of $445-$455 million for fiscal 2024. It anticipates a reported tax rate of 12% and a comparable tax rate of 18.5% for fiscal 2025. The company expects shares outstanding to be 183 million at the end of fiscal 2025, inclusive of share repurchases.

Constellation Brands reaffirmed its forecast for operating cash flow of $2.8-$3 billion for fiscal 2025. It expects a free cash flow of $1.4-$1.5 billion. STZ plans to incur capital expenditure of $1.4-$1.5 billion in fiscal 2025.

Stocks to Consider

We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Vital Farms (VITL - Free Report) , Freshpet (FRPT - Free Report) and Keurig Dr Pepper (KDP - Free Report) .

Vital Farms offers a range of produced pasture-raised foods. VITL presently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 102.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for Vital Farms’ current financial year’s sales and earnings per share indicates growth of 22.6% and 62.7%, respectively, from the year-ago reported figures.

Freshpet is a pet food company that manufactures and markets natural fresh foods, refrigerated meals, and treats for dogs and cats in the United States and Canada. FRPT currently sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 118.2%, on average.

The Zacks Consensus Estimate for FRPT’s current financial-year sales and earnings suggests growth of 24.8% and 177.1%, respectively, from the year-ago reported figures.

Keurig Dr Pepper, a beverage and coffee company in the United States and Canada, currently carries a Zacks Rank #2 (Buy). KDP has a trailing four-quarter earnings surprise of 5.2%, on average.

The Zacks Consensus Estimate for KDP’s current financial-year sales and earnings indicates growth of 4.1% and 7.3%, respectively, from the year-earlier actuals.

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