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Category: Constellation Brands (STZ)
Date: 7 January 2021 Stock price of Constellation Brands (STZ): $232.65 We take a look at the 3rd quarter 2021 earnings report of Constellation Brands (STZ) 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
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Despite the challenges of the COVID-19 global pandemic, we were still able to achieve a strong start to the year "
More 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 (STZ) 3rd quarter 2021 earnings report
Beer:
Wine and Spirits:
- Constellation’s Beer Business posted double-digit depletion growth of 12%, as inventory levels improve and strong performance in off-premise channels continues to more than offset the COVID-19 impact of the approximately 35% reduction in the on-premise channel.
- Modelo Especial achieved nearly 20% depletion growth and was the #1 Import share gainer in IRI channels.
- The Corona Brand Family grew nearly 12% in IRI channels driven by Corona Premier, delivering over 20% growth, Corona Extra, and Corona Hard Seltzer.
- Corona Hard Seltzer continues to exceed expectations as velocity and distribution of nearly 70% ACV in IRI channels remain strong; hard seltzer innovation expected to launch in early fiscal 2022 with the introduction of Variety Pack #2.
- Pacifico posted growth of almost 35% in IRI channels, and was a top share gainer within the import segment.
- Operating margin increased 330 basis points to 42.6%, as benefits from favorable marketing and SG&A as a percent of net sales and the Ballast Point Divestiture were partially offset by increased COGS
- Shipment volumes significantly outpaced depletion volumes as product inventories begin to rebuild from a COVID-related slowdown of Mexican beer production earlier this year. Due to continued robust consumer demand, product inventories are now expected to return to normal levels during the fourth quarter fiscal 2021 as shipment volume is expected to continue to outpace depletion volume for the remainder of the fiscal year.
- The Beer Business is targeting 7 - 9% net sales growth and 8 - 10% operating income growth for fiscal 2021.
Wine and Spirits:
- Marketplace performance for higher-end wine Power Brands outpaced the total higher-end wine category driven by doubledigit growth for Kim Crawford, Meiomi, and The Prisoner Brand Family.
- Successful innovation initiatives are contributing to top-line growth with Power Brand introductions like The Prisoner cabernet sauvignon and chardonnay varietals, along with Meiomi cabernet sauvignon, which has become the largest ultra premium wine launch this year in IRI channels.
- Operating margin decreased 220 basis points to 24.0% as benefits from mix and price were more than offset by unfavorable fixed cost absorption resulting from wildfires and increased marketing.
- The Wine and Spirits business expects fiscal 2021 reported net sales and operating income decline of 9 - 11% and 16 - 18%, respectively; retained portfolio post wine and spirits divestitures expected to grow net sales 2 - 4%
Constellation Brands management commentary 3rd quarter 2021 earnings report
"Our business performance accelerated during the quarter despite ongoing headwinds from the pandemic, as we remain obsessed with meeting the needs of our consumers while staying focused on our long-term growth strategy" - Bill Newlands, CEO and President of Constellation Brands
"The finalization of our Wine and Spirits transactions enhances the financial profile of our business and enables further debt reduction so that we can continue to execute our commitment to return $5 billion in value to shareholders through dividends and share repurchases through fiscal 2023 - Grant Hankinson, Chief Financial Officer
Outlook provided;
●Beer: net sales growth of 7 - 9%; excluding impact of Ballast Point Divestiture, expect to be at the upper-end of the range and including Ballast Point Divestiture, expect to be at the lower-end of the range; operating income growth of 8 - 10%
● Wine and Spirits: reported net sales and operating income decline of 9 - 11% and 16 - 18%, respectively; retained portfolio post wine and spirits divestitures, expected to grow net sales 2 - 4%
● Interest expense: approximately $390 million
● Tax rate: reported approximately 21%, comparable excluding Canopy equity earnings impact approximately 19%
● Weighted average diluted shares outstanding: approximately 195 million; assumes no additional share repurchases for fiscal 2021
● Operating cash flow: $2.5 - $2.7 billion
● Capital expenditures: $800 - $900 million
● Free cash flow: $1.7 - $1.8 billion
"The finalization of our Wine and Spirits transactions enhances the financial profile of our business and enables further debt reduction so that we can continue to execute our commitment to return $5 billion in value to shareholders through dividends and share repurchases through fiscal 2023 - Grant Hankinson, Chief Financial Officer
Outlook provided;
●Beer: net sales growth of 7 - 9%; excluding impact of Ballast Point Divestiture, expect to be at the upper-end of the range and including Ballast Point Divestiture, expect to be at the lower-end of the range; operating income growth of 8 - 10%
● Wine and Spirits: reported net sales and operating income decline of 9 - 11% and 16 - 18%, respectively; retained portfolio post wine and spirits divestitures, expected to grow net sales 2 - 4%
● Interest expense: approximately $390 million
● Tax rate: reported approximately 21%, comparable excluding Canopy equity earnings impact approximately 19%
● Weighted average diluted shares outstanding: approximately 195 million; assumes no additional share repurchases for fiscal 2021
● Operating cash flow: $2.5 - $2.7 billion
● Capital expenditures: $800 - $900 million
● Free cash flow: $1.7 - $1.8 billion
Constellation Brands (STZ) stock price history over the last 5 years
The image below, obtained from Google shows the stock price history of Constellation Brands (STZ) for the last 5 years and it's been a pretty good time for Constellation Brands stockholders over the last 5 years. 5 years ago the stock was trading at around $147 and its currently trading at $232.6. That's a strong return of 55.6% provided to Constellation Brands stockholders over the last 5 years.
The stock of Constellation Brands is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Constellation Brands stock is very positive at this point in time.
The stock of Constellation Brands is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Constellation Brands stock is very positive at this point in time.
Latest stock valuation of Constellation Brands
So what is Constellation Brands stock worth based on their 3rd quarter 2021 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Constellation Brands at $213.40 a stock (up very slightly from our 2nd quarter 2021 earnings report review of Constellation Brands).
We therefore believe the stock of Constellation Brands is overvalued at its current price of $232.65
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $213.0, thus a good entry point into Constellation Brands would be at $192 or below.
We expect the stock of Constellation Brands to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued right now
We therefore believe the stock of Constellation Brands is overvalued at its current price of $232.65
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $213.0, thus a good entry point into Constellation Brands would be at $192 or below.
We expect the stock of Constellation Brands to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued right now
Next earnings release
It is expected that Constellation Brands will release their 3th quarter 2021 earnings report