Beer, wine, and spirits company Constellation Brands (NYSE:STZ) missed analysts' expectations in Q3 FY2024, with revenue up 1.4% year on year to $2.47 billion. It made a non-GAAP profit of $3.19 per share, improving from its profit of $2.83 per share in the same quarter last year.
Key Takeaways from Constellation Brands's Q3 Results It was encouraging to see Constellation Brands slightly top analysts' EPS expectations this quarter based on better operating profit. It was also good to see its gross margin narrowly outperformed Wall Street's estimates. However, revenue missed due to underperformance in the 'Wines & Spirits' segment. Additionally, full-year earnings guidance missed analysts' expectations. Overall, this was a mixed quarter for Constellation Brands. The stock is flat after reporting and currently trades at $243.99 per share.
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Constellation Brands (STZ) Q3 FY2024 Highlights:
- Market Capitalization: $44.51 billion
- Revenue: $2.47 billion vs analyst estimates of $2.54 billion (2.6% miss)
- EPS (non-GAAP): $3.19 vs analyst estimates of $3.00 (6.5% beat)
- Free Cash Flow of $394.9 million, down 39.4% from the previous quarter
- Gross Margin (GAAP): 51.4%, up from 50.5% in the same quarter last year
- Organic Revenue was up 2% year on year
Beverages and AlcoholThe beverages and alcohol category encompasses companies engaged in the production, distribution, and sale of refreshments like beer, wine, and spirits, along with soft drinks, juices, and bottled water. 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.
The industry is highly competitive, with a diverse range of products from large multinational corporations, niche brands, and startups vying for market share. It's also subject to varying degrees of government regulation and taxation, especially for alcoholic beverages.
Sales GrowthConstellation 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 4.7% over the last three years was mediocre for a consumer staples business.
This quarter, Constellation Brands's revenue grew 1.4% year on year to $2.47 billion, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 7.9% over the next 12 months, an acceleration from this quarter.
Organic Revenue GrowthWhen 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 4.8% year on year.
In the latest quarter, Constellation Brands's organic sales rose 2% year on year. By the company's standards, this growth was a meaningful deceleration from the 6% year-on-year increase it posted 12 months ago. We'll be watching Constellation Brands closely to see if it can reaccelerate growth.