|
Related Topics
|
Category: Stock Market and Constellation Brands
Date: 3 October 2019 Stock Price: $206.79 We take a look at the 1st quarter earnings report of their 2020 fiscal year of Constellation Brands a leading international producer and marketer of beer, wine and spirits, and the owner of Corona beer.
|
About Constellation Brands
Constellation Brands (NYSE: STZ and STZ.B), a Fortune 500® company, is a leading international producer and marketer of beer, wine and spirits with operations in the U.S., Mexico, New Zealand, Italy, and Canada. Constellation is the No. 3 beer company in the U.S. with high-end, iconic imported beer brands such as the Corona and Modelo brand families, and Pacifico. Its high-quality wine and spirits brands include the Robert Mondavi and The Prisoner Wine Company brand families, Kim Crawford, Ruffino, Meiomi, and SVEDKA Vodka. The company’s portfolio also includes a collection of highly-rated wine brands such as SIMI and Mount Veeder Winery, spirits brands High West Whiskey and Casa Noble Tequila, as well as new wine innovations such as Cooper & Thief and Spoken Barrel.
Based in Victor, N.Y., the company believes that industry leadership involves a commitment to brand building, our trade partners, the environment, our investors, and to consumers around the world who choose our products when celebrating big moments or enjoying quiet ones. Since its founding in 1945, Constellation’s ability to see, meet and stay ahead of shifting consumer preferences and trends across total beverage alcohol has fueled our success and made us one of the top growth contributors in beverage alcohol in the U.S.
Based in Victor, N.Y., the company believes that industry leadership involves a commitment to brand building, our trade partners, the environment, our investors, and to consumers around the world who choose our products when celebrating big moments or enjoying quiet ones. Since its founding in 1945, Constellation’s ability to see, meet and stay ahead of shifting consumer preferences and trends across total beverage alcohol has fueled our success and made us one of the top growth contributors in beverage alcohol in the U.S.
Overview of Constellation Brands' latest earnings report
- Net sales: $2.282 billion (up from $2.230 billion for the same quarter of the previous year)
- Net sales increased by 2.33% over the last 12 months
- Cost of sales: $1.068 billion (up from $998.5 million for the same quarter of the previous year)
- Cost of sales increased by 6.96% over the last 12 months
- Net loss: -$245.4million (down from $743.8 million profit for the same quarter of the previous year)
- Diluted loss per share: -$1.19 (down from $3.48 profit per share for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 168.118 million (down from 197.060 million for the same quarter of the previous year)
- Cash and cash equivalents: $98.7 million
- Cash and cash equivalents per share: $0.58
- Cash and cash equivalents makes up 0.28% of Constellation's market capital
- Cash and cash equivalents makes up 0.34% of Constellation's total assets
- Accounts receivable: $788.3 million
- Accounts receivable makes up 2.72% of Constellation's total assets
- Inventories: $1.494 billion
- Inventories makes up 5.16% of Constellation's total assets
- Goodwill: $7.75 billion
- Goodwill makes up 26.7% of Constellation's total assets. We are always nervous about goodwill making up such a large chunk of a company's assets. Basically goodwill is the estimated value of the name and reputation of the brands they hold. So if they were to sell Corona for example the group will attach a value of goodwill to Corona and tell the buyer this is how much goodwill is in the brand name. Such valuations are usually very subjective and its easy to manipulate or overinflate if you want to overstate the value of your company's assets.
- Goodwill amounts to $46.10 a Constellation Brands stock
- Stockholders equity of Constellation': $12.488 billion
- Stockholders equity per share for Constellation Brands : $74.28
- So Constellation brands is trading at 2.78 times it stockholders equity per share which is well within the expected range of between 2 and 4 times most companies tend to trade at.
Constellation Brands' management commentary on the results and earnings guidance
”As we kick off fiscal 20, I’m pleased with our strong start to the year. Our wine and spirits transformation strategy is working led by our collection of Power Brands, which delivered industry leading depletion growth of 4% during the quarter. In addition, our iconic beer portfolio continues to be a cornerstone of growth in the U.S. beer industry driven by double digit depletion growth for Modelo Especial and Corona Premier. We believe these brands, along with our innovation initiatives, will drive our targeted goals for the year.” said Bill Newlands, President and Chief Executive of the group
Business optimization initiatives
During the first quarter, the company recognized $72 million of charges that were excluded from comparable basis results in connection with ongoing efforts to gain efficiencies and reduce the cost structure of the business. These charges, which are primarily related to the wine and spirits business, include costs associated with certain write-downs of excess inventory, contract terminations, and organizational structure changes.
Canopy growth investments
Canopy Growth equity earnings for first quarter fiscal 2020 totaled a loss of $106.0 million on a reported basis and a loss of $54.4 million on a comparable basis. Canopy Growth and Acreage Holdings, Inc. shareholders approved Canopy Growth’s proposed acquisition of Acreage Holdings, Inc., which positions Canopy Growth to enter the U.S. cannabis market once federally permissible. The transaction also results in the extended duration of Canopy Growth warrants held by Constellation, which is expected to result in a material gain during the second quarter fiscal 2020.
Quarterly dividend
On June 27, 2019, Constellation’s board of directors declared a quarterly cash dividend of $0.75 per share of Class A Common Stock and $0.68 per share of Class B Common Stock, payable on August 27, 2019, to stockholders of record as of the close of business on August 13, 2019.
Outlook
The table below sets forth management’s current EPS expectations for fiscal 2020 compared to fiscal 2019 actual results, both on a reported basis, a comparable basis, and a comparable basis excluding Canopy equity losses and related activities.
Business optimization initiatives
During the first quarter, the company recognized $72 million of charges that were excluded from comparable basis results in connection with ongoing efforts to gain efficiencies and reduce the cost structure of the business. These charges, which are primarily related to the wine and spirits business, include costs associated with certain write-downs of excess inventory, contract terminations, and organizational structure changes.
Canopy growth investments
Canopy Growth equity earnings for first quarter fiscal 2020 totaled a loss of $106.0 million on a reported basis and a loss of $54.4 million on a comparable basis. Canopy Growth and Acreage Holdings, Inc. shareholders approved Canopy Growth’s proposed acquisition of Acreage Holdings, Inc., which positions Canopy Growth to enter the U.S. cannabis market once federally permissible. The transaction also results in the extended duration of Canopy Growth warrants held by Constellation, which is expected to result in a material gain during the second quarter fiscal 2020.
Quarterly dividend
On June 27, 2019, Constellation’s board of directors declared a quarterly cash dividend of $0.75 per share of Class A Common Stock and $0.68 per share of Class B Common Stock, payable on August 27, 2019, to stockholders of record as of the close of business on August 13, 2019.
Outlook
The table below sets forth management’s current EPS expectations for fiscal 2020 compared to fiscal 2019 actual results, both on a reported basis, a comparable basis, and a comparable basis excluding Canopy equity losses and related activities.
Constellation Brands (NYSE: STZ) stock price history
The image below, obtained from Google, shows the stock price history of Constellation Brands (NYSE: STZ) for the last 5 years. And it's been a very good time for Constellation Brands stockholders. 5 years ago the stock was trading at around $87 a stock and its currently trading at $206.79 a stock. That's a very strong return of 137.7% provided by Constellation Brands over the last 5 years. The stock of Constellation Brands is trading at a lot closer to its 52 week high of $228.91 than it is to its 52 week low of $150.37 which to us is a clear indication that the short term sentiment and momentum of Constellation Brands stock is very positive.
Recent coverage of Constellation
The extract below shows some of the latest coverage on Constellation Brands obtained from Zacks
Constellation Brands Inc. (STZ - Free Report) is slated to report top and bottom-line results for second-quarter fiscal 2020 on Oct 3. Investors are optimistic about the beer business’s contributions, which has been a key growth driver for the company over the past several quarters. Furthermore, its constant brand-building efforts, acquisitions and innovation are likely to drive top and bottom-line growth in the quarters ahead.
However, investors are skeptical of the persistent softness in the company’s wine & spirits business. Additionally, impacts of adjustments related to loss from the Canopy Growth (CGC - Free Report) deal (mostly higher interest expenses) and other activities as well as the wine and spirits divestitures are likely to affect Constellation Brands’ bottom line in the quarters ahead. Despite the pros and cons, this Zacks Rank #3 (Hold) stock has been displaying strong momentum, with shares gaining 1.5% in the past month compared with the industry’s 0.1% growth. Additionally, the stock has grown about 28.9% year to date, keeping it in investors’ good books.
Read the full article here
Constellation Brands Inc. (STZ - Free Report) is slated to report top and bottom-line results for second-quarter fiscal 2020 on Oct 3. Investors are optimistic about the beer business’s contributions, which has been a key growth driver for the company over the past several quarters. Furthermore, its constant brand-building efforts, acquisitions and innovation are likely to drive top and bottom-line growth in the quarters ahead.
However, investors are skeptical of the persistent softness in the company’s wine & spirits business. Additionally, impacts of adjustments related to loss from the Canopy Growth (CGC - Free Report) deal (mostly higher interest expenses) and other activities as well as the wine and spirits divestitures are likely to affect Constellation Brands’ bottom line in the quarters ahead. Despite the pros and cons, this Zacks Rank #3 (Hold) stock has been displaying strong momentum, with shares gaining 1.5% in the past month compared with the industry’s 0.1% growth. Additionally, the stock has grown about 28.9% year to date, keeping it in investors’ good books.
Read the full article here
Constellation Brands (NYSE: STZ) latest stock valuation
So what is Constellation Brands (NYSE: STZ) stock worth based on the release of their latest earnings report and fiscal guidance provide? Based on their earnings report and the guidance provided our valuation models provide a target (full value) price for Constellation Brands of $208 a stock. We therefore believe that the stock is fully valued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $208. So a good entry point into Constellation Brands stock would be at $187 or below. We expect the stock of Constellation brands to remain around current levels in the short run, unless their 2nd quarter earnings surprises and acts as a catalyst to either send the stock higher or lower. The results of Constellation for Q2 of their 2020 fiscal year is expected to be release later today. We will do an updated valuation taking their latest earnings report into account
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $208. So a good entry point into Constellation Brands stock would be at $187 or below. We expect the stock of Constellation brands to remain around current levels in the short run, unless their 2nd quarter earnings surprises and acts as a catalyst to either send the stock higher or lower. The results of Constellation for Q2 of their 2020 fiscal year is expected to be release later today. We will do an updated valuation taking their latest earnings report into account