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Nov 30, 2020
Constellation Brands Q3 2021 Earnings Report
Constellation Brands delivered excellent results, driven by strong cash generation and further debt reduction.
Key Takeaways
Constellation Brands reported a strong third quarter in fiscal year 2021, with beer depletion growth accelerating to 12%. The company generated $2.4 billion in operating cash flow and $1.9 billion in free cash flow. Despite COVID-related headwinds, comparable basis EPS excluding Canopy Growth equity losses increased by 32%.
Generated reported basis EPS of $6.55 and comparable basis EPS of $3.09, including Canopy Growth equity losses of $0.08; excluding Canopy Growth equity losses, achieved comparable basis EPS of $3.16, an increase of 32%.
Beer depletion growth accelerated; inventory levels improved driven by organic shipment growth of 28%.
Wine and Spirits Business delivered double-digit higher-end Power Brand growth in IRI channels, outpacing the higher-end of the U.S. Wine and Spirits segment.
Generated $2.4 billion of operating cash flow and $1.9 billion of free cash flow, an increase of 14% and 23%, respectively.
Revenue by Segment
Forward Guidance
Constellation Brands provided its fiscal year 2021 outlook, including assumptions for beer net sales growth, wine and spirits net sales decline, interest expense, tax rate, weighted average diluted shares outstanding, operating cash flow, capital expenditures, and free cash flow.
Positive Outlook
- Beer: net sales growth of 7 - 9%; excluding impact of Ballast Point Divestiture, expect to be at the upper-end of the range and including Ballast Point Divestiture, expect to be at the lower-end of the range; operating income growth of 8 - 10%
- Wine and Spirits: retained portfolio post wine and spirits divestitures, expected to grow net sales 2 - 4%
- Operating cash flow: $2.5 - $2.7 billion
- Free cash flow: $1.7 - $1.8 billion
- Tax rate: comparable excluding Canopy equity earnings impact approximately 19%
Challenges Ahead
- Wine and Spirits: reported net sales and operating income decline of 9 - 11% and 16 - 18%, respectively
- Interest expense: approximately $390 million
Historical Earnings Impact
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Avg. Return Before/After Earnings
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