What to expect when Constellation Brands (STZ) reports earnings this week

Shares of Constellation Brands Inc. (NYSE: STZ) were down 1% on Tuesday. The stock has dropped 8% over the past 12 months. The company is slated to report its third quarter 2023 earnings results on Thursday, January 5. Here’s a look at what to expect:

Revenue

Analysts expect Constellation Brands to post revenues of $2.4 billion for the third quarter of 2023. This compares to $2.3 billion reported in the third quarter of 2022. For the second quarter of 2023, the company reported $2.6 billion in revenues, reflecting a year-over-year growth of 12%. The top line growth in the second quarter was driven by strong demand for the company’s products.

Earnings

Analysts are estimating EPS of $2.90 per share for Q3 2023. This reflects a 7% decline from adjusted EPS of $3.12 reported in the same quarter a year ago. In Q2 2023, Constellation delivered adjusted EPS of $3.17 which was up 33% YoY. On a reported basis, the company delivered a net loss of $6.30 per share in Q2.

Segments and trends

During the second quarter, Constellation recorded a 15% growth in net sales for its Beer segment, driven by strength in brands such as Modelo Especial, Modelo Chelada, Corona Extra and Pacifico. Sales in the Wine and Spirits segment rose 1%, inclusive of sales growth of 15% in DTC channels and 10% in international markets.

The company continued to see strong demand for its higher-end beer and wine and spirits products during the second quarter and remains optimistic about the long-term growth prospects of its portfolio. Constellation’s efforts at transforming its wine and spirits business to focus mainly on the higher-end segment is paying off. Its largest premium wine, fine wine and craft spirits brands such as Meiomi, Kim Crawford and Ruffino delivered positive depletion growth in Q2.

Constellation posted depletion growth of nearly 9% in its beer business in Q2, driven by strength in Modelo Especial and Corona Extra. Depletion volume selling days were flat YoY in Q2 and the company expects it to remain flat in Q3 as well.

During the third and fourth quarters of fiscal year 2023, Constellation expects to lap increased shipments from the second half of fiscal year 2022 which were the result of the rebuilding of distributor and retailer inventories after supply shortages and severe weather caused shipping disruptions in the first half of FY2022. Over the medium term, the company expects its beer business to deliver net sales growth of 7-9%, helped by the momentum of its core brands, brewing capacity additions and new product launches.

Click here to read the full transcript of Constellation Brands’ Q2 2023 earnings conference call