Driven by the acquisition of Crown Imports business last year,
Constellation Brands Inc.
) posted a year-over-year rise of 72% in its fourth-quarter
fiscal 2014 adjusted earnings per share, which came in at 81
cents. Moreover, quarterly earnings surpassed the Zacks Consensus
Estimate of 76 cents per share.
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On a reported basis, the company registered earnings of 79 cents
per share, against 43 cents in the comparable year-ago quarter.
Net sales in the quarter soared 85.5% year over year to $1,291.2
million and came almost in line with the Zacks Consensus Estimate
of $1,291.0 million. The year-over-year increase on the top line
was primarily attributable to complete consolidation of the Crown
Import business as well as the strong demand for beer. The
company's beer segment revenues increased 13% to $597.8 million
from $528.2 million in the comparable year-ago quarter.
On an organic basis, the company's wine and spirits sales rose 1%
year over year as the benefit of volume growth was largely offset
by increased promotional expenses and unfavorable mix.
Fiscal 2014 Synopsis
For fiscal 2014, the company's adjusted earnings came at $3.25
per share, up 48% from fiscal 2013 and surpassed the Zacks
Consensus Estimate of $3.19 per share. Revenues for the year rose
approximately 74% to $4,867.7 million and marginally surpassed
the Zacks Consensus Estimate of $4,860.0 million.
Cost and Margin Performance for Q4
Adjusted gross profit for the quarter surged by a whopping 108%
year over year to $549.6 million. Consequently, adjusted gross
profit margin contracted substantially from 62.1% in the
prior-year quarter to 42.6% in fourth-quarter 2014.
Adjusted selling, general and administrative (SG&A) expenses
climbed 62.5% to $211.8 million in the quarter. Based on sales,
it contracted 230 bps to 16.4% 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 increased 83% to
$337.8 million from $133.6 million in the year-ago quarter.
Adjusted operating margin expanded 700 bps to 26.2%.
During the quarter, the company's interest expense rose nearly
47.0% to $88.5 million, primarily due to increased average
borrowings, partially offset by lower interest due to partial
Constellation Brands, which competes with
Boston Beer Co. Inc.
Molson Coors Brewing Co.
) ended the quarter with cash and cash investments of $63.9
million. During fiscal 2014, Constellation Brands generated
$826.2 million of cash from operations. As of Feb 28, 2014, the
company had $6,373.3 million of long-term debt (excluding current
Fiscal 2015 Outlook
Following the strong close to fiscal 2014, the company came up
with its forecasts for fiscal 2015. Constellation Brands expects
fiscal 2015 adjusted earnings to be in the range of $3.95 - $4.15
per share, 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 $3.75 - $3.95 versus $9.83
reported in fiscal 2014.
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 million.
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.
Coming to the projections for the beer segment, 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 #3