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Nov 30, 2019
Constellation Brands Q3 2020 Earnings Report
Delivered strong Q3 performance and increased EPS and cash flow guidance.
Key Takeaways
Constellation Brands delivered a strong Q3 performance, powered largely by its beer business. The company is increasing its EPS and cash flow guidance for the year. The Wine & Spirits transformation strategy is gaining traction.
Generated reported basis EPS of $1.85 and comparable basis EPS of $2.14, including Canopy Growth equity losses of $0.25; excluding Canopy Growth equity losses, achieved comparable basis EPS of $2.39.
Generated $2.1 billion of operating cash flow and $1.5 billion of free cash flow, an increase of 5% and 14%, respectively.
Increased fiscal 2020 reported basis EPS outlook to $0.95 - $1.05; increased comparable basis EPS outlook to $9.45 - $9.55.
Increased fiscal 2020 operating cash flow target to approximately $2.3 billion and free cash flow projection to $1.5 - $1.6 billion.
Constellation Brands
Constellation Brands
Constellation Brands Revenue by Segment
Revenue by Segment
Beer Revenue
CapyFin.comWine & Spirits Revenue
CapyFin.com Forward Guidance
Management provided EPS expectations for fiscal year 2020.
Positive Outlook
- Beer: net sales growth of 7 - 8% and operating income growth of 8 - 9%
- Wine and Spirits: net sales and operating income decline of 8 - 10%
- Interest expense: approximately $430 million
- Tax rate: reported 97% to 99%, reflecting fiscal 2020 year to date Canopy fair value tax benefit, comparable excluding Canopy equity earnings impact approximately 18%
- Weighted average diluted shares outstanding: approximately 195 million; assumes no additional share repurchases for fiscal 2020
Challenges Ahead
- Operating cash flow: $2.2 - $2.4 billion
- Capital expenditures: $700 - $800 million, including approximately $560 million targeted for Mexico beer operations expansion activities
- Free cash flow: $1.5 - $1.6 billion
- The reported basis EPS guidance includes the fiscal 2020 year to date Canopy equity earnings and related activities impact.
- Guidance does not reflect future changes in the fair value of the company’s investments in Canopy’s warrants and convertible debt securities.