Constellation Brands Q3 Earnings Top Estimates; Enters Deal With Coca-Cola For FRESCA Brand

Constellation Brands Inc STZ reported a third-quarter FY22 sales decline of 4.8% year-on-year, to $2.32 billion, beating the analyst consensus of $2.28 billion.

• Net sales for the Beer segment grew 4%Y/Y to $1.8 billion, and wine and spirits fell 25% Y/Y to $568 million.
• Shipment volume for beer increased 3.1%, while wine and spirits declined 38.6%.
• Gross profit of $1.2 billion declined 3.4% Y/Y, while gross margin of 52.8% expanded 80 basis points.
• Operating margin of 36.2% expanded by 410 basis points.
• Comparable EPS of $3.12 beat the consensus of $2.76. Comparable EPS, excluding Canopy equity losses, rose 8% Y/Y to $3.42.
• The company generated an operating cash flow of $2.4 billion, a free cash flow of $1.8 billion, and ended the quarter with $361.3 million in cash and equivalents. 
• Constellation's board declared a quarterly cash dividend of $0.76 per share of Class A Common Stock and $0.69 per share of Class B Common Stock, payable on February 23, 2022, to stockholders of record on February 9, 2022.
• Guidance: Constellation sees FY22 reported EPS of $(0.25)- $(0.10) (prior view EPS of $0.30 - $0.60). It raised comparable EPS outlook to $10.50-$10.65 (prior view $10.15 - $10.45), versus $9.88 consensus.
• "Our incremental capacity investments in Mexico will position us to capture the ongoing growth opportunities we see within the high-end segment of the U.S. beer market well into the future," said CFO Garth Hankinson.
• In a separate press release, Constellation Brands disclosed a brand authorization agreement with Coca-Cola Co KO in the U.S. regarding the FRESCA brand.
• Constellation Brands will manufacture, market, and distribute new FRESCA Mixed cocktails, which will launch this year in the U.S.
• Price Action: STZ shares are trading higher by 0.26% at $254.03 on the last check Thursday.