Stellar Beer Sales, Souring Wine: Constellation Brands' Q3 Earnings Reveal Diverse Portfolio Performance

Constellation Brands Inc STZ, an international producer and marketer of beer, wine, and spirits, reported third-quarter FY24 net sales growth of 1.4% year-on-year to $2.47 billion, missing the analyst consensus of $2.54 billion.

Net sales for the Beer segment increased 4% Y/Y to $1.968 billion, and Wine and Spirits declined 8% Y/Y to $502.4 million.

Shipment volume for Beer climbed 3.4%, while Wine and Spirits plunged 11.6%.

Gross profit increased 3.6% to $1.27 billion, and the operating income rose 6.7% to $796.9 million. The operating margin for the quarter was 32.2%.

Comparable EPS of $3.19 beat the consensus estimate of $3.00.

The company generated an operating cash flow of $2.35 billion for the nine months and a free cash flow of $1.4 billion.

Constellation Brands ended the quarter with $78.8 million in cash and equivalents. 

Constellation's board declared a quarterly cash dividend of $0.89 per share, payable on February 22, 2024, to stockholders of record on February 8, 2024.

"The continued strong performance of our Beer portfolio in Q3 has given us the confidence to raise our full-year operating income outlook for that Business," said CFO Garth Hankinson.

"In addition, we now expect higher enterprise operating cash flow and free cash flow in Fiscal 2024."

Guidance: Constellation cut FY24 reported EPS outlook from $9.60 - $9.80 to $9.15 - $9.35.

STZ affirmed FY24 comparable EPS guidance, excluding Canopy EIE, $12.00 - $12.20 versus an estimate of $11.65.

STZ raised FY24 operating cash flow forecast from $2.4 billion - $2.6 billion to $2.6 billion - $2.8 billion and free cash flow outlook from $1.2 billion - $1.3 billion to $1.4 billion - $1.5 billion.

Citing near-term headwinds in the wine market, the company reduced its FY24 Wine and Spirits Business outlook for organic net sales to decline of 7%-9% and operating income to decline of 6%-8%.

Price Action: STZ shares are trading higher by 2.37% at $248.08 on the last check Friday.

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