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Constellation Brands Inc Class A - Stock Quote STZ

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Morningstar's Constellation Brands Inc Class A Stock Analysis

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Wide-Moat Constellation Brands Beer Portfolio Brews Impressive Results Again; Shares Undervalued

Jaime M. Katz, CFA Senior Equity Analyst

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).

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Constellation Brands Inc Class A's Company Profile

Business Description

Constellation Brands is the largest multi-category alcohol supplier in the U.S. The business is anchored by a portfolio of Mexican beer trademarks, including Corona and Modelo, for which it acquired exclusive and perpetual U.S. ownership from AB InBev. The latter had to divest these rights due to antitrust mandates as it consummated its 2013 acquisition of dominant Mexican brewer, Grupo Modelo. Constellation’s wine/spirits business is in transition, and it has divested several lower-margin assets, including myriad wine brands and its Ballast Point craft beer brand. The firm imports most products after manufacturing them abroad, going to market through independent wholesalers. It owns 38.6% of Canopy Growth, a leading provider of medicinal and recreational cannabis products.

207 High Point Drive, Building 100, Victor
New York, NY, 14564
T +1 585 678-7100
Sector Consumer Defensive
Industry Beverages - Wineries & Distilleries
Most Recent Earnings Feb 28, 2022
Fiscal Year End Feb 28, 2023
Stock Type Classic Growth
Employees 10,000

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