Driven by the acquisition of Crown Imports business last year,
Constellation Brands Inc.
) adjusted earnings for the first quarter of fiscal 2015 jumped
nearly threefold to $1.07 per share from 38 cents posted in the
comparable year-ago quarter. Moreover, quarterly earnings surpassed
the Zacks Consensus Estimate of 92 cents per share.
On a reported basis, the company registered earnings of $1.03
per share, against 27 cents in the comparable year-ago quarter.
Net sales in the quarter soared over twofold to $1,526.0 million
from $673.4 million in the first quarter of fiscal 2014. Moreover,
the company's top-line was also above the Zacks Consensus Estimate
of $1,478.0 million.
The year-over-year increase in top line was primarily
attributable to complete consolidation of the Crown Import business
as well as strong demand for beer. The company's beer segment
revenues increased 14% to $867.7 million from $761.6 million in the
comparable year-ago quarter.
However, the company's wine and spirits sales declined 2% year
over year to $658.3 million due to unfavorable foreign currency
exchange rates and lower shipment volume resulting from destocking
of inventory by distributors. On a constant currency basis, the
segment's net sales inched down 1%.
Cost and Margin Performance for Q1
Adjusted gross profit for the quarter surged by a whopping 163%
year over year to $678.0 million. Consequently, adjusted gross
profit margin expanded 610 basis points (bps) to 44.4% from 38.3%
in the prior-year quarter.
Adjusted selling, general and administrative (SG&A) expenses
climbed 77.5% to $273.4 million in the quarter. Based on sales, it
contracted 500 bps to 17.9% from the comparable prior-year quarter
on the back of effective cost management.
Due to consolidation of the newly acquired businesses,
Constellation Brands' adjusted operating income jumped nearly
fourfold to $404.6 million from $103.6 million in the year-ago
quarter. Adjusted operating margin increased to 26.5% from 15.4% in
the year-ago comparable quarter primarily driven by higher gross
margin and lower SG&A expenses as a percentage of net
During the quarter, the company's interest expense rose nearly
58.0% to $86.4 million, primarily due to increased average
borrowings from the acquisition of Crown Imports, partially offset
by lower interest rate.
Constellation Brands, which competes with
Boston Beer Co. Inc.
), ended the quarter with cash and cash investments of $378.0
million. During the quarter, Constellation Brands generated $232.3
million of cash from operations and free cash flow of $100.9
million. As of May 31, 2014, the company had $6,345.6 million of
long-term debt (excluding current maturities).
Fiscal 2015 Outlook
Following its strong start of the fiscal, the company raised its
forecasts for fiscal 2015. Constellation Brands now expects fiscal
2015 adjusted earnings to be in the range of $4.10 - $4.25 per
share, up from previous guidance range of $3.95-$4.15 per share and
compared with $3.25 earned in fiscal 2014. On a reported basis,
earnings per share in fiscal 2015 are now anticipated to be in the
range of $3.90 - $4.05 as against $3.75 - $3.95 projected earlier
and $9.83 reported in fiscal 2014.
Currently, the Zacks Consensus Estimate for Constellation Brands
is pegged at $4.12 per share which we believe could witness an
upward revision following the company's upbeat guidance.
Certain factors were considered before providing the earnings
guidance, such as an interest expense expectation in the range of
$345-$355 million, an approximate tax rate of 30% and weighted
average diluted shares outstanding of approximately 201
Moreover, the company is expected to incur capital expenditures
in the band of $575-$625 million, including $450-$500 million
slated for the beer business. Additionally, the company hopes to
generate free cash flow in the range of $425-$500 million.
At the time of its earnings release for the fourth quarter of
fiscal 2014, the company had provided some projections for the beer
segment in fiscal 2015. The company anticipates sales growth for
the beer segment in the mid-to-high single digit range. Moreover,
the company expects adjusted operating income for the beer segment
to increase in the 10%-12% range, while on a reported basis,
including the anticipated brewery acquisition benefit, operating
income is projected to grow in the low-to-mid 20% range.
On the other hand, sales and operating income for the wine and
spirits segment in fiscal 2015 is expected to grow in the
low-to-mid single digit range.
Constellation Brands currently carries a Zacks Rank #2
Other Stocks to Consider
Constellation Brands is not the only stock which is performing
well in the alcoholic beverage industry. Some other better-ranked
stocks which are worth considering include
Molson Coors Brewing Company
) both carrying Zacks Rank #2 (Buy).
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CONSTELLATN BRD (STZ): Free Stock Analysis
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