Analyst Note| Jaime M. Katz, CFA |
We don’t plan any material change to our $262 fair value estimate for wide-moat Constellation after digesting its February-ended fiscal 2022 fourth-quarter results. Net sales rose 3% to $2.1 billion, bringing 2021 full-year sales to $8.8 billion, equaling our forecast. These results were bolstered by the strong performance of the beer business (75% of sales), which had depletion growth of 10%. The segment was again paced by Modelo, the top share gainer in the category, which had depletion growth of 15%. Although the beer business operating margin slid (down 110 basis points to 40%) due to inflation in commodity inputs, management was able to offset the hit partially with price hikes that were slightly above the typical 1%-2% (displaying the pricing power the brand has with its constituents).