Backed by the strength in its beer business, Constellation Brands Inc. 's STZ adjusted earnings for the fourth quarter of fiscal 2015 jumped 27% year over year to $1.03 per share, cruising much ahead of the Zacks Consensus Estimate of 94 cents.
On a reported basis, the company registered earnings of $1.06 per share, climbing 34% from the year-ago comparable quarter.
Net sales in the quarter rose nearly 5% to $1,356 million from $1,291 million in the fourth quarter of fiscal 2014. On a currency adjusted basis, net sales rose 6% in the quarter. However, the company's top line marginally missed the Zacks Consensus Estimate of $1,359 million.
The year-over-year increase in top line was attributed to strong volumes at the beer business, which drove 11% growth in that segment. Meanwhile, wine and spirits sales, on a constant currency basis, increased 2% year over year owing to favorable mix and distributor performance payments, offset by reduced volume.
Cost and Margin Performance
Adjusted gross profit for the quarter surged 7.7% year over year to $591.9 million. Consequently, adjusted gross profit margin expanded 120 basis points (bps) to 43.8%.
Driven by robust beer business volumes, Constellation Brands' adjusted operating income rose 3.9% to nearly $350 million while adjusted operating margin contracted 40 bps to 25.8%.
Constellation Brands ended the quarter with cash and cash equivalents of $110.1 million. As of Feb 28, 2015, the company had $7,137.5 million of long-term debt (excluding current maturities) and its total shareholders' equity stood at $5,881.3 million.
During the fiscal, Constellation Brands generated $1,081 million of cash from operations and free cash flow of $361.6 million.
Moreover, the company has initiated its dividend program, under which quarterly cash dividend of 31 cents per share on Class A shares and 28 cents per share on Class B shares will be paid on May 22, 2015 to shareholders of record as of May 8, 2015.
Fiscal 2016 Outlook
Following a strong fourth quarter, management provided a favorable guidance for fiscal 2016. Constellation Brands envisions adjusted earnings to be in the range of $4.70-$4.90, compared with $4.44 per share reported in fiscal 2015. On a reported basis, earnings per share in fiscal 2016 are anticipated to be in the range of $4.55-$4.75. Currently, the Zacks Consensus Estimate for Constellation Brands is pegged at $4.81 per share, which could witness a revision following the company's guidance.
Coming to sales, the company expects its beer segment sales to increase in the high-single digit range, with mid-single digit volume growth. On the other hand, its wine and spirits business sales are expected to grow in the low-to-mid-single digit range. Operating income at the beer business is expected to increase 10%-12%, while wine and spirits operating income is projected to grow in the low-to-mid-single digit range.
Certain factors were considered before providing the earnings guidance, such as an interest expense expectation in the range of $325-$335 million, an approximate tax rate of 30.5% and weighted average diluted shares outstanding of approximately 204 million.
Moreover, the company expects capital expenditures in the band of $1.05-$1.15 billion for fiscal 2016. This is expected to include $900 million to $1.05 billion for the beer business. Pertaining to this guidance, the company hopes to generate free cash flow in the range of $100-$200 million.
Other Stocks to Consider
Constellation Brands currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the related Beverages-Soft Drinks industry include Monster Beverage Corp. MNST , with a Zacks Rank #1 (Strong Buy), Coca-Cola Amatil Limited CCLAY and Cott Corporation COT , both carrying a Zacks Rank #2 (Buy).