Constellation Brands (NYSE:STZ) Misses Q3 Sales Targets
Beer, wine, and spirits company Constellation Brands (NYSE:STZ) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 2.9% year on year to $2.92 billion. Its non-GAAP profit of $4.32 per share was 6% above analysts’ consensus estimates.
Is now the time to buy Constellation Brands? Find out by accessing our full research report, it’s free.
Constellation Brands (STZ) Q3 CY2024 Highlights:
- Revenue: $2.92 billion vs analyst estimates of $2.94 billion (in line)
- EPS (non-GAAP): $4.32 vs analyst estimates of $4.07 (6% beat)
- EPS (non-GAAP) guidance for the full year is $13.70 at the midpoint, roughly in line with what analysts were expecting
- Gross Margin (GAAP): 51.8%, in line with the same quarter last year
- One-time impairment charge impacts GAAP operating income and EPS, but we tend to look through this because it's non-recurring
- Free Cash Flow Margin: 29.3%, up from 23% in the same quarter last year
- Organic Revenue rose 3% year on year (7% in the same quarter last year)
- Market Capitalization: $46.58 billion
Company Overview
With a presence in more than 100 countries, Constellation Brands (NYSE:STZ) is a globally renowned producer and marketer of beer, wine, and spirits.
Beverages and Alcohol
These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the explosion of alcoholic craft beer drinks or the steady decline of non-alcoholic sugary sodas. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.
Sales Growth
Constellation Brands is one of the larger consumer staples companies and benefits from a well-known brand, giving it customer mindshare and influence over purchasing decisions.
As you can see below, the company’s annualized revenue growth rate of 5.1% over the last three years was tepid for a consumer staples business.
This quarter, Constellation Brands’s revenue grew 2.9% year on year to $2.92 billion, falling short of Wall Street’s estimates. Looking ahead, Wall Street expects sales to grow 6.1% over the next 12 months, an acceleration from this quarter.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
Organic Revenue Growth
When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding the impacts of foreign currency fluctuations and one-time events such as mergers, acquisitions, and divestitures.
The demand for Constellation Brands’s products has generally risen over the last two years but lagged behind the broader sector. On average, the company’s organic sales have grown by 4.3% year on year.
In the latest quarter, Constellation Brands’s organic sales rose 3% year on year. By the company’s standards, this growth was a meaningful deceleration from the 7% year-on-year increase it posted 12 months ago. We’ll be watching Constellation Brands closely to see if it can reaccelerate growth.
Key Takeaways from Constellation Brands’s Q3 Results
It was encouraging to see Constellation Brands slightly top analysts’ gross margin and EPS expectations this quarter. On the other hand, its organic revenue unfortunately missed analysts’ expectations, leading to a revenue miss. Looking forward, EPS guidance was in line, showing that the company is on track. Overall, this was a weaker quarter. The stock remained flat at $257.65 immediately after reporting.
Is Constellation Brands an attractive investment opportunity at the current price?When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
