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ROCHESTER, N.Y., Oct. 08, 2024 (GLOBE NEWSWIRE) -- Constellation Brands (NYSE: STZ), a leading beverage alcohol company, today announced the appointment of E. Yuri Hermida as the company's new Executive Vice President, Chief Growth & Strategy Officer. In this role, Hermida will be responsible for Consumer Insights & Innovation, Digital, Transformation, Media, New Business Ventures, and Strategy & Analytics. He will report directly to Bill Newlands, President and Chief Executive Officer, and will serve as a ...

A brief update from my last coverage on Constellation Brands (NYSE: STZ ) (NEOE: STZ:CA ). I gave a buy rating in July, and my key thesis was that STZ should continue to grow its earnings healthily I'm a passionate investor with a strong foundation in fundamental analysis and a keen eye for identifying undervalued companies with long-term growth potential. My investment approach is a blend of value investing principles and a focus on long-term growth. I believe in buying quality companies at a discount to t ...

Last week, Constellation Brands Inc. STZ reported second-quarter adjusted earnings per share of $4.32, beating the analyst consensus of $4.08. Quarterly revenues of $2.92 billion beat the street view of $2.90 billion. The company reported a loss per share of $6.59, including a $2.25 billion non-cash goodwill impairment loss for the Wine and Spirits business. BofA Securities downgraded Constellation Brands, reflecting lowered calendar year 2025 estimates amid slower beer volume growth. The analyst writes, "W ...

Core Viewpoint - Constellation Brands Inc (STZ) reported mixed financial results in its 10-Q filing, highlighting a modest increase in net sales but significant goodwill impairment in its Wine and Spirits segment, while maintaining a strong position in the beer market with a focus on premiumization and digital business acceleration [1][2]. Financial Performance - STZ reported net sales of $5,580.7 million for the six months ended August 31, 2024, up from $5,351.7 million the previous year, indicating a growth of approximately 4.3% [1]. - The company faced a goodwill impairment of $2,250.0 million in its Wine and Spirits segment, reflecting challenges in that market [1]. Strengths - STZ has a powerful portfolio of high-end beer brands, particularly Mexican imports like Modelo and Corona, which account for 80% of its sales and have driven a $108.9 million increase in beer net sales due to shipment volume growth [2]. - The company maintains a resilient balance sheet with retained earnings of $12,727.2 million as of August 31, 2024, supporting strategic investments and shareholder returns [2]. - STZ's strategic focus on premiumization and digital business acceleration, including the acquisition of the Sea Smoke wine business, enhances its competitive edge [2][5]. Weaknesses - The $2,250.0 million goodwill impairment in the Wine and Spirits segment indicates vulnerabilities, raising concerns about its future outlook [3]. - STZ's heavy reliance on its beer segment, particularly Mexican imports, poses a risk, as 80% of revenue comes from this category [3]. - Operational risks related to production disruptions and supply chain constraints are present, necessitating robust risk management strategies [3]. Opportunities - STZ can expand its market reach by capitalizing on international growth prospects and the rising demand for premium alcoholic beverages [4]. - The company's focus on innovation allows for the development of new products and line extensions, as seen with its investment in the Sea Smoke wine business and entry into the cannabis market [5]. - STZ's Digital Business Acceleration initiative positions it to enhance online presence and e-commerce capabilities, aligning with shifting consumer purchasing behaviors [5]. Threats - Global economic challenges, including inflation and supply chain disruptions, pose significant threats to STZ's cost structure and profitability [6]. - The beverage alcohol industry is highly regulated, and compliance with evolving regulations and ESG considerations requires ongoing investment [6]. - The competitive landscape necessitates continuous innovation and differentiation to maintain market position [6].

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Financial Data and Key Metrics Changes - The company achieved a 3% growth in enterprise net sales for Q2 fiscal 2025, while enterprise operating income decreased by 226% on a reported basis but increased by 13% on a comparable basis [14] - A non-cash goodwill impairment loss of $2.25 billion for the Wine and Spirits business impacted reported enterprise operating income [15] - The company reached a net leverage ratio of 2.9, slightly below the target of approximately three times [5] Business Line Data and Key Metrics Changes Beer Business - The Beer business net sales grew by 6%, driven by a 4.6% increase in shipment volume and favorable pricing [15][16] - Operating income for the Beer segment increased by 13%, with a 270 basis point increase in operating margin to 42.6% [20] - Beer depletions grew by 2.4%, marking the 58th consecutive quarter of growth [16] Wine and Spirits Business - Wine and Spirits shipments declined by 9.8% year-on-year, leading to a 12% decrease in net sales and a 13% decline in operating income [10][24] - The company expects full-year net sales and operating income declines of 4% to 6% and 16% to 18%, respectively, for the Wine and Spirits business [11] Market Data and Key Metrics Changes - The company maintained its leading share-gaining position in the U.S. beer market, outperforming the total beverage industry in dollar sales growth [13][64] - The Wine and Spirits business faced headwinds, particularly in lower-priced segments, affecting performance [9] Company Strategy and Development Direction - The company continues to focus on operational efficiency and cost savings, enabling incremental marketing investments in its largest beer brands [4][8] - A disciplined capital allocation strategy is in place, with nearly $250 million returned to shareholders through share repurchases in Q2 [5][13] - The company plans to continue tactical pricing and marketing support for its higher-end wine brands to improve performance [10][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic headwinds, particularly rising unemployment, impacting consumer demand [5][34] - Despite challenges, management remains optimistic about the back half of the fiscal year, expecting sequential improvements in the Wine and Spirits business [60][65] - The company anticipates Beer business net sales growth of 6% to 8% and operating income growth of 11% to 12% for fiscal 2025 [8][18] Other Important Information - The company will publish its annual ESG impact report in alignment with fiscal year-end materials [12] - Free cash flow for the first half of fiscal 2025 was $1.2 billion, a 12% increase from the prior period [27] Q&A Session Summary Question: Share repurchase strategy after hitting leverage target - Management indicated a continued opportunistic approach to share repurchases, with $2.2 billion authorization remaining [30] Question: Insights on softer beer depletions - Management attributed softer depletions to macro factors, including higher unemployment, and noted strong buy rates [34][35] Question: Impact of increased shelf space on Beer top line growth - Management confirmed double-digit share gains from spring resets and expects marketing investments to enhance results [38] Question: Performance of Corona brand - Management acknowledged a slight softness in Corona but expressed optimism due to upcoming marketing initiatives [41][42] Question: Timing of beer shipments and depletions - Management expects shipments and depletions to align more closely in the second half of the year, with historical patterns influencing performance [49] Question: Marketing plans for Wine and Spirits - Management emphasized a focus on operational improvements rather than acquisitions, with expectations for sequential improvement in the Wine and Spirits business [60] Question: Fair value and impairment of Wine and Spirits assets - Management clarified that the impairment was a non-cash accounting requirement and does not change the strategic outlook for the business [62]

Core Insights - Constellation Brands reported mixed second-quarter results, with strong beer sales but a decline in wine and spirits sales [1][4] - The company’s diluted earnings per share for the second quarter of fiscal 2025 was $4.32, exceeding analyst estimates, while revenue increased by 2.9% to $2.92 billion, falling short of forecasts [2] - CEO Bill Newlands indicated that the beverage alcohol market is facing challenges due to the current macroeconomic environment [1][4] Beer Sales Performance - Sales of Modelo Especial, the top-selling beer in the U.S., increased by 5%, while Pacifico saw a significant surge of around 23%. However, sales of Corona Extra decreased by 3% [3] - Overall beer sales contributed positively to the company’s performance in the quarter [1] Wine and Spirits Sales Decline - Wine and spirits sales fell by 12% to $388.7 million, primarily due to a 9.8% decline in shipment volumes [4] - The company anticipates full-year net sales growth of 4% to 6%, with beer sales projected to rise by 6% to 8%, while wine and spirits sales are expected to decline by 4% to 6% [4]

Core Insights - Constellation Brands, Inc. reported second-quarter fiscal 2025 results with earnings exceeding estimates but sales slightly missing consensus expectations, driven by strong beer performance and improved operating margins, while the wine and spirits segment faced declines [1][3]. Financial Performance - Comparable earnings per share (EPS) reached $4.32, a 14% year-over-year increase, surpassing the Zacks Consensus Estimate of $4.11 [2]. - Reported EPS showed a loss of $6.59, influenced by a non-cash goodwill impairment loss of $2.25 billion in the wine and spirits business [2]. - Net sales increased by 3% year over year to $2.92 billion, falling short of the Zacks Consensus Estimate of $2.95 billion [3]. Segment Performance - Beer business sales rose 6% year over year to $2.5 billion, supported by a 4.6% increase in shipment volumes and 2.4% growth in depletion volumes [5]. - The wine and spirits segment saw a 12% decline in sales to $388.7 million, impacted by a 9.8% decrease in shipment volumes and a 17.6% drop in depletions [7]. Operating Margins - Comparable operating income was $1.09 billion, up 13% from the prior year, primarily due to strong performance in the beer segment [8]. - Operating income for the beer segment improved 13% to $1.08 billion, with an operating margin expansion of 270 basis points to 42.6% [9]. - The wine and spirits segment's operating income declined 13% to $70.5 million, maintaining a flat operating margin of 18% [10]. Financial Position - As of August 31, 2024, cash and cash equivalents stood at $64.4 million, with long-term debt at $10.7 billion and total shareholders' equity at $7.9 billion [11]. - The company generated an operating cash flow of $1.9 billion and an adjusted free cash flow of $1.2 billion for the six months ended August 31, 2024 [11]. Future Outlook - The company revised its fiscal 2025 EPS outlook, expecting enterprise net sales growth of 4-6%, with the beer segment projected to grow 6-8% and the wine and spirits segment expected to decline 4-6% [13]. - Comparable EPS guidance for fiscal 2025 is set at $13.60-$13.80 per share, with reported EPS expectations narrowed to $4.05-$4.25 [15]. - Anticipated interest expenses for fiscal 2025 are $430 million, with a reported tax rate of 9% and a comparable tax rate of 18.5% [16].

Core Insights - Constellation Brands reported mixed Q2 results, with strong performance in the beer segment and challenges in the wine and spirits division [1][5] Beer Segment Performance - The beer business experienced a 6.0% increase in net sales and a 4.6% rise in shipment volumes [4] - Modelo Especial saw a 5% increase in demand, while Pacifico experienced a 23% boost [4] - Operating margins improved by 270 basis points year-over-year to 42.6%, supported by cost-saving measures [4] - Adjusted EPS reached $4.32, up 14% year-over-year, with revenues of $2.92 billion, a 3% increase [4] - The company reaffirmed its FY25 guidance with an adjusted EPS of $13.60-13.80 and revenue growth of 4-6% [4] Wine and Spirits Segment Challenges - The wine and spirits division faced a 12.0% sales decline and a 9.8% drop in shipment volumes due to tough macroeconomic conditions [2] - A goodwill impairment loss of $2.25 billion was recorded, at the higher end of the estimated range of $1.5-$2.5 billion [2] - The company is restructuring this division by selling off 90% of its lower-end brands to focus on premium offerings [3] - CEO William Newlands indicated that potential benefits from this strategy might not materialize until later quarters of FY25, with economic challenges possibly delaying results [3] Overall Impact - The disparity between the beer and wine and spirits segments is affecting overall results and potentially the stock price [5] - Investor patience is waning as the wine and spirits division continues to underperform, highlighting the need for a turnaround amid ongoing economic headwinds [5]