What to expect when Constellation Brands (STZ) reports Q1 2024 earnings next week

Shares of Constellation Brands, Inc. (NYSE: STZ) were down 1% on Friday. The stock has gained 11% over the past three months. The beverages company is scheduled to report its first quarter 2024 earnings results on Friday, June 30, before market open. Here’s a look at what to expect from the earnings report:

Revenue

Analysts are projecting revenue of $2.47 billion for the first quarter of 2024, which would reflect a growth of over 4% from the same period last year. In the fourth quarter of 2023, net sales declined 5% year-over-year to $1.99 billion.

Earnings

The consensus estimate is for earnings of $2.83 per share in Q1 2024, which compares to EPS of $2.66 reported in the year-ago quarter. In Q4 2023, comparable EPS decreased 16% YoY to $1.98.

Points to note

Constellation’s beer business remains a point of strength and despite a slight decline in sales and shipments during the fourth quarter of 2023, the segment saw depletion growth of 6.3%. The company saw strong gains from brands like Modelo Especial, Corona Extra and Pacifico. This momentum is expected to continue in the first quarter and into the new fiscal year.

Constellation’s investments in capacity expansion and product innovation are also expected to drive growth for the beer business. However, margins in this segment continue to be under pressure due to higher costs which offset benefits from favorable pricing.

The wine and spirits business continues to face challenges with sales falling 14% in Q4 2023. Shipments were down 22% and depletions dropped 4.9%. Organic sales fell 9%. However, the company’s strategy of focusing more on premium brands is paying off.

In FY2023, Constellation divested a collection of its mainstream wine brands as part of its decision to focus on higher-end brands. It witnessed strong gains across higher-end brands such as Kim Crawford, Ruffino, The Prisoner Wine Co., and Casa Noble during the fourth quarter.

The company’s higher-end brands saw strong growth in its direct-to-consumer channels and international markets in Q4. Constellation expects its portfolio to shift towards the higher-end over time and for these brands, markets and channels to drive sales growth. Margins in this segment are benefiting from favorable mix and productivity initiatives. The company expects strong growth in its higher-end brands to offset the weakness in its mainstream brands.