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    Jul 4, 2024, 7:59:53 AM

    Constellation Brands Q1 FY2025: Highlights and Outlook

    Constellation Brands Q1 FY2025: Highlights and Outlook

    Constellation Brands (NYSE: STZ) reported a strong start to fiscal year 2025, particularly driven by its Beer Business. However, despite robust performance in several areas, the company's stock price recently saw a 5% decline. This article highlights the key points from the Q1 FY2025 earnings release and provides an outlook for the company's future.

    Financial Highlights

    1. Earnings Per Share (EPS):

      • Reported EPS: $4.78
      • Comparable EPS: $3.57

    2. Net Sales and Income:

      • Net Sales: $2.66 billion, a 6% increase year-over-year.
      • Operating Income: $942 million, a significant 23% increase.
      • Net Income attributable to Constellation Brands: $877 million, a notable improvement from $135.9 million the previous year.

    3. Cash Flow:

      • Operating Cash Flow: $691 million, a 4% increase.
      • Free Cash Flow: $315 million, a 19% decrease, primarily due to brewery capacity investments.

    4. Shareholder Returns:

      • Over $240 million returned to shareholders through share repurchases by June 2024.
      • Quarterly cash dividend of $1.01 per share of Class A Common Stock declared, payable on August 23, 2024.

    Business Segment Performance

    • Beer Business:

      • Achieved 8% net sales growth, driven by a 7.6% increase in shipment volumes.
      • Operating margin increased to 40.6%, supported by net sales growth and cost-saving initiatives.
      • Strong performance from key brands such as Modelo Especial (up 11%), Pacifico (up 21%), and Modelo Chelada brands (up 5%).

    • Wine and Spirits Business:

      • Net sales declined by 7%, with a 5.1% decrease in shipment volumes.
      • Operating margin decreased to 15.3%, impacted by lower volumes and higher costs.
      • Despite challenges, the segment reaffirmed its fiscal 2025 outlook, expecting net sales to range from a 0.5% decline to a 0.5% increase.

    Outlook for Fiscal 2025

    Constellation Brands provided an updated fiscal 2025 outlook, with expectations set as follows:

    • EPS:

      • Reported EPS: $14.63 - $14.93
      • Comparable EPS: $13.50 - $13.80

    • Sales and Income:

      • Enterprise-wide net sales growth: 6% - 7%
      • Beer segment net sales growth: 7% - 9%
      • Wine and Spirits segment net sales: range from a 0.5% decline to a 0.5% increase.
      • Operating income growth: Reported 10% - 12%, Comparable 8% - 10%

    • Cash Flow:

      • Operating Cash Flow: $2.8 - $3.0 billion
      • Free Cash Flow: $1.4 - $1.5 billion

    • Capital Expenditures:

      • Approximately $1.4 - $1.5 billion, with $1.2 billion targeted for Mexico beer operations.

    Conclusion

    Constellation Brands has demonstrated solid financial performance in Q1 FY2025, particularly through its Beer Business. The company continues to show resilience and strategic growth initiatives despite market challenges. Investors should note the robust fiscal outlook and ongoing capital investments aimed at sustaining long-term growth. However, the recent 5% decline in stock price underscores the need for cautious optimism as market conditions evolve.

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