Constellation Brands Down 5% On Better Than Expected Results

Thursday, April 8, 2021 | Thomas Hughes
Constellation Brands Down 5% On Better Than Expected Results

Constellation's Q4 Results Offset By Weak Guidance 

Constellation Brands (NYSE: STZ) shares are down 5.0% in early action after posting a better-than-expected quarter. The catch is that results are better than the broad consensus of analysts, a consensus that has trailed reality as it has with so many other stocks in the market today. While the broad community of analysts has failed to revise targets this is not the case for all. Analysts like Bank of America (NYSE: BAC) called the stock out as recently as the day before earnings as an estimate-beater. Their team was expecting beer growth in the high-single-digits which Constellation beat that easily, and for wine and spirit growth in the range of 3.4% and nailed that target soundly. Bank of American was also expecting a positive upgrade to guidance and some mention of share buybacks but was disappointed on both fronts. 

Constellation Brands Optimization Plan Pays Off 

Constellation Brands' story has more in common with the broad market than just the analyst's sentiment. The company began a repositioning and portfolio optimization strategy well before the pandemic struck and those efforts were rewarded in the post-pandemic period. The focus of the strategy is portfolio optimization toward the higher-end beer, wine, and spirits that command the most attention from consumers. In that light, the small 3.0% YOY increase in revenue is even more important to note because it includes the negative impact of divestitures and beats the consensus by 420 basis points. Revenue growth was driven by a 15% increase in beer sales, 16% organically, and a 3.3% increase in the ongoing wine and spirits business. 

Moving down the report, the company's margins contracted a bit due to COVID-related costs but are expected to bounce back over the next year. At the operating level, income fell 6% despite the revenue strength but came in ahead of consensus and helped the company achieve record operating income and free cash flow for the fiscal year. On the bottom line, the $1.95 in GAAP earnings and $1.82 in adjusted earnings both beat the consensus by wide $0.31 and $0.27 margins. As for the cash, the company has been paying down debt to the tune of $1.7 billion in F2021 and paying dividends to shareholders. 

The guidance for F2022 is good but not as good as what the analysts were expecting. The $9.95 to $10.25 in adjusted earnings is flat to slightly higher on a YOY basis and short of the $10.40 currently expected by the analysts but may not be fully factoring in the economic reopening expected for this summer. 

Constellation Brands Dividend Is Growing

Constellation Brands pays a safe and growing dividend albeit at a very slow pace. The company is targeting (and has) a 30% payout ratio which is something we like but earnings growth is expected to be tepid so we don't expect robust increases in the year to come. Other than that, the 1.3% yield is reliable and backed up by a sound and strengthening balance sheet. 

Looking at the charts, patient investors should be able to scoop this blue-chip consumer staple at a better yield and price point. Shares are down 5.0% and show little signs of support at this level. With revenue and earnings growth expected to be tepid this year we see a scenario in which this stock moves down to the bottom of its range near $208. If this level emerges as a strong support zone we might become interested, until then this stock is in a wait, watch and see what happens kind of market.

Constellation Brands Down 5% On Better Than Expected Results

Featured Article: G-20

7 Sports Betting Stocks That Will Shine Beyond March Madness

One of the many consequences of the novel coronavirus was the shutdown of live sports. For sports-minded individuals, one of the events that were missed the most was the NCAA Basketball Tournament affectionately known as March Madness.

But in addition to missing the entertainment that sports provide, cities and states realized, if they didn’t already, that sports are an economic necessity.

Live sports may also be a key to their post-pandemic future. But this goes beyond hotels and restaurants.

Sports betting has become big business. Currently, 25 states and the District of Columbia have legalized sports betting either by statute or by ballot initiative. That list is likely to grow. Many states face budget deficits and want to legalize sports betting for the revenue that it could receive.

And this is about more than allowing gamblers to place bets via a sportsbook in a casino. The real driver for this is mobile sports betting. According to the American Gaming Association, over 47 million people are expected to place bets during the NCAA basketball tournament, with approximately one-third of those bets (17.8 million) being placed online.

To help you take advantage of this still-emerging trend, we’ve put together this special presentation. Here we’ll highlight seven sports betting stocks that should generate significant revenue during March Madness and beyond.

View the "7 Sports Betting Stocks That Will Shine Beyond March Madness".

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Constellation Brands (STZ)2.2$238.86+1.8%0.39%23.26Buy$238.75
Compare These Stocks  Add These Stocks to My Watchlist 

MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more.

MarketBeat is accredited by the Better Business Bureau

© American Consumer News, LLC dba MarketBeat® 2010-2021. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security. Learn more.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information

© 2021 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research. As a bonus to opt-ing into our email newsletters, you will also get a free subscription to the Liberty Through Wealth e-newsletter. You can opt out at any time.