Overview - In which business segments is Constellation Brands, Inc. active?
Constellation Brands, Inc. (STZ) is a leading company in the alcoholic beverage industry, headquartered in Victor, New York. Founded in 1945, it has grown to become one of the largest suppliers of premium beers, wines and spirits in the world. Its best-known brands include Corona, Modelo, Robert Mondavi and Kim Crawford.
The company is pursuing a dynamic growth strategy based on innovation and strategic acquisitions. A significant step was the investment in Canopy Growth Corporation (WEED), a leading company in the cannabis industry, in order to tap into the potential for cannabis-infused beverages, which I will discuss in more detail later.
Constellation Brands is listed on the New York Stock Exchange (NYSE) under the symbol STZ and is considered a company not to be neglected in the alcoholic beverages sector. The company attaches great importance to sustainability and social responsibility, is involved in environmental initiatives to reduce water and energy consumption and supports various social projects.
Through its strong brand management and effective marketing strategies, Constellation Brands has secured a firm place in the industry.
As of July 2024, Constellation Brands has a market capitalization of around USD 46 billion. The company employs around 10,000 people worldwide. These figures illustrate Constellation Brands' significant position in the global beverage industry.
Before the quarterly figures - Has the cannabis hype come to an end?
Constellation Brands and Canopy Growth have had a strategic partnership since 2019, in which the beverage manufacturer invested billions of dollars (define) in the cannabis company. Now, however, Constellation Brands is planning to distance itself from the struggling cannabis producer and has already taken several steps in this direction. Constellation Brands is converting its common shares into shares without voting rights and profit entitlement. In addition, the members supported by Constellation have left the board of Canopy Growth. It now remains to be seen whether the distancing will bring new momentum to the share.
What are the sales expectations?
Analysts expect sales for the past quarter to amount to USD 2.67 billion, which corresponds to an increase of 6.3 % compared to the same quarter of the previous year. These estimates together form the consensus.
What can we expect from the profits?
Ahead of the event, analysts expect Constellation Brands to report earnings of $3.46 per share, up $18.9 % from $2.91 per share in the year-ago quarter. The company has consistently beaten Wall Street earnings estimates in recent quarterly reports. In the last reported quarter, adjusted earnings rose by USD 14.1 % to USD 2.26 per share, beating the consensus estimate by USD 7.6 %.
What does TOGGLE's AI predict?
TOGGLE's AI forecasts a possible average price gain of 0.56% in the next month if Constellation Brands does not meet expectations. If expectations are exceeded, the AI also forecasts a price gain of 2.28% in the following month.
Fundamental data analysis - How do we use fundamental data?
Aus vergangenen Finanz- und Geschäftsdaten lassen sich in der Fundamentalanalyse Rückschlüsse auf die aktuelle Lage eines Unternehmens ziehen. Hierbei sind Faktoren wie Verschuldung, Gewinn und Cashflow von großer Bedeutung. Um diese Kennzahlen angemessen zu interpretieren, ist es entscheidend, sie in Relation zu einem Vergleichsuniversum zu setzen. Auf diese Weise lässt sich beurteilen, ob das Unternehmen im Vergleich zu anderen in seiner Branche eine eher starke oder schwache Position einnimmt.
We take a look at the balance sheet
Over the past five years, Constellation Brands' debt ratio has increased from around 55 % to currently over 62 %. The ratio has risen sharply in the last two years in particular. In comparison, direct competitors such as Molson Coors Brewing (TAP) have had significantly lower debt ratios of around 50 % in recent years. A significantly higher debt ratio naturally represents a significantly higher cost block in the current high-interest phase.
Is Constallation Brands sufficiently profitable?
Profitability is one of the fundamental cornerstones of a company. If a company is not profitable, there is a risk that it will burn through capital in the medium and long term.
Constellation Brands has recorded steady sales growth over the past five years. In 2019, turnover amounted to USD 8.12 billion, while in 2024 it was USD 9.96 billion. This represents continuous, albeit moderate, sales growth.
In contrast, competitors such as Molson Coors Brewing have hardly been able to increase their sales in recent years.
In the 2023 financial year, Constellation Brands had a gross margin of 8.23 %. In comparison, the gross margin of Molson Coors Brewing was 12.70 % and that of Boston Beer Company was 6.07 %. This puts Constellation Brands in the midfield in terms of gross margins.
In the 2023 financial year, the net profit margin of Constellation Brands amounted to -0.75 %. By comparison, Molson Coors Brewing has a net profit margin of 8.11 %, while Boston Beer Company has a net profit margin of 3.80 %. Constellation Brands' negative net profit margin is due to the unprofitable cannabis division acquired in 2019 and the coronavirus crash. The drastic slump in the margin from 42.33 % in 2019 to -0.14 % in 2020 is clearly visible.
Finally, we take a look at the key management figures. In the 2023 financial year, Constellation Brands' return on assets (RoA) was -0.29 %, while the return on equity (RoE) was -0.84 %. However, these figures increased significantly in the 2024 financial year to 6.72 % (RoA) and 17.73 % (RoE). In contrast, Molson Coors Brewing had a RoA of 3.60 % and a RoE of 7.19 % in 2023. The data cited here comes from Börse.de.
Key valuation ratios of Constellation Brands
Constellation Brands currently has a price/earnings ratio (P/E ratio) of around 27, while Molson Coors has a P/E ratio of around 11.5.
In addition, Constellation Brands has a price/sales ratio (P/S ratio) of 4.7, which is considered relatively high on average for the sector.
Finally, we look at the dividend yield, which is not negligible and currently stands at 1.39 %. The company has been paying dividends since 2016, and these have neither been reduced nor significantly increased since then.
Constellation Brands' dividend yield is in the middle of the industry average. However, the dividend yield is not particularly attractive across all sectors. The data cited here comes from Trader Workstation and Yahoo Finance.
Technical analysis - What technical signals can we get from the chart?
Constellation Brands' share price is currently at USD 256, which is around 6.4 % below the all-time high reached in August 2022. Following the recovery of the markets after the corona crash, the share is moving in a sideways channel with a lower end of USD 205 and an upper end of USD 275.
The Constellation Brands share price is currently close to the 200-day line, which from a technical perspective indicates that the share is neither oversold nor overbought. A price breakout above USD 275 could signal upside potential in the medium term and trigger a long signal. In contrast, a fall in the share price below USD 225 could send a medium-term short signal. The upcoming results could set a new significant trend in motion. The data mentioned here comes from the Trader Workstation
Conclusion - The evaluation of Constellation Brands
In summary, it can be said that Constellation Brands is convincing in some areas, while there are high risks in others. A positive aspect is the company's continuously rising turnover. On the negative side, however, are the increased debt ratio and the negative net margin, which has recovered significantly in the current year. The 2019 move to invest in the cannabis industry appears to have failed and has swallowed up considerable capital. In addition, the alcohol industry is under pressure as healthier lifestyles and abstaining from alcohol are becoming increasingly popular among Western populations.
From a technical chart perspective, the share is also not sending a positive signal at present, as it is in a sideways channel. It remains to be seen whether the share can leave this channel. Despite the decision to distance itself from Canopy Growth, I am rather pessimistic about the future prospects of Constellation Brands and rate the share as a "sell".
