Mixed Bag For Constellation Brands: Earnings Reveal Strong Profits Amid Sales Forecast Cut

Constellation Brands Inc STZ announced its earnings results Friday for the three months ending on November 30, 2023, showing mixed outcomes. The wine and spirits distributor reported a rise in net income to $509.1 million, or $2.76 per share, up from $467.7 million, or $2.52 per share, in the same period last year. Constellation recently stepped back from the cannabis-infused drinks market.

The company’s sales, totaling $2.471 billion, marked a slight increase from $2.437 billion a year earlier but fell short of the anticipated $2.538 billion. This led to a downward revision of the full-year guidance, now expecting fiscal 2024 EPS to be between $9.15 and $9.35, a drop from the previous forecast of $9.60.

Q3 2024 Financial Highlights

• Revenue was $2.47 billion, a sight increase from the $2.44 million from the same period last year
• Net income was $509.1 million, compared to the $467.7 of Q3 2022
• Adjusted EBIT was $755.1 million, an increase compared to the $709.5 from Q3 2022
• Gross profit was $1.27 billion, also showing a modest growth in comparison to the $1.23 billion from the same period in 2022

Leadership Insight

Constellation’s president and CEO, Bill Newlands, highlighted the robust performance of Modelo Especial, which saw double-digit volume growth and overtook Anheuser-Busch's BUD Bud Light as the best-selling beer in the U.S. in 2023. "This outstanding performance has reinforced our conviction in our Fiscal 2024 enterprise outlook, despite an adjustment to our Wine and Spirits Business guidance due to near-term headwinds in the wine market,” said Newlands.

Challenges In The Wine Market And Future Outlook

The beer business reported a 4% sales increase, with shipment growth of 3.4% and a depletion volume rise of 8.2%. However, the wine and spirits segment experienced an 8% sales decline, with shipments dropping by 11.6% and depletions falling by 10%.

Facing near-term challenges in the wine market, the wine and spirits business anticipates a 7% to 9% drop in fiscal 2024 organic net sales and a 6% to 8% decrease in operating income, largely due to market slowdown and U.S. wholesale underperformance.

STZ Price Action
STZ's shares were trading 2.79% higher at $249.08 per share at the time of this writing around noon ET Friday.

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Photo by William Warby.