Constellation Brands, Inc. (NYSE: STZ)

Sector: Consumer Defensive Industry: Beverages - Brewers CIK: 0000016918
Market Cap 28.38 Bn
P/B 5.92
P/E 15.19
P/S 6.64
ROIC (Qtr) 8.40
Div Yield % 0.67
Rev 1y % (Qtr) -9.78
Total Debt (Qtr) 10.66 Bn
Debt/Equity (Qtr) 1.38
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About

Constellation Brands, Inc., often recognized by its ticker symbol STZ, is a prominent international player in the production and marketing of beer, wine, and spirits. The company operates in various countries, including the United States, Mexico, New Zealand, and Italy, with a diverse portfolio of high-end brands such as Corona Extra, Modelo Especial, Robert Mondavi Winery, Kim Crawford, Meiomi, The Prisoner Wine Company, High West, Casa Noble, and Mi CAMPO, among others. The company's primary business activities revolve around the production and...

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Investment thesis

Bull case

  • Operating cash flow of 2.70B provides exceptional 52.04x coverage of minority interest expenses 51.90M, showing strong core operations.
  • Operating cash flow of 2.70B provides strong 45.39x coverage of stock compensation 59.50M, indicating sustainable incentive practices.
  • Robust free cash flow of 1.81B exceeds capital expenditure of 895.40M by 2.02x, indicating strong organic growth funding capability.
  • Robust tangible asset base of 13.96B provides 18.97x coverage of working capital 735.90M, indicating strong operational backing.
  • Retained earnings of 13.55B provide full 1.32x coverage of long-term debt 10.29B, indicating strong internal capital position.

Bear case

  • With cash reserves of 152.40M against inventory of 1.38B, the 0.11 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 2.70B provides thin coverage of dividend payments of (719.30M) with a -3.75 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 152.40M provide limited coverage of acquisition spending of 1.25B, which is 0.12x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Free cash flow of 1.81B represents just -1.94x of debt issuance (930.90M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Cash position of 152.40M provides weak coverage of payables of 976.50M, which is 0.16x, indicating potential working capital stress and supplier relationship risks.

Segments Breakdown of Revenue (2023)

Peer comparison

Companies in the Beverages - Brewers
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 BUD Anheuser-Busch InBev SA/NV 158.47 Bn 22.27 2.71 -
2 STZ Constellation Brands, Inc. 28.38 Bn 15.19 6.64 10.66 Bn
3 TAP Molson Coors Beverage Co 9.41 Bn 18.31 2.27 6.29 Bn
4 SAM Boston Beer Co Inc 2.47 Bn 26.82 1.25 0.04 Bn
5 FMX Mexican Economic Development Inc 0.00 Bn 0.00 0.00 -
6 CCU United Breweries Co Inc 0.00 Bn 0.00 0.00 -
7 ABEV Ambev S.A. 0.00 Bn 0.00 0.00 -

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.64 1.27
EV to Cash from Ops. EV/CFO 44.65 19.25
EV to Debt EV to Debt 3.33 16.13
EV to EBIT EV/EBIT 15.04 15.87
EV to EBITDA EV/EBITDA 48.26 23.75
EV to Free Cash Flow [EV/FCF] EV/FCF 51.34 23.14
EV to Market Cap EV to Market Cap 1.25 1.21
EV to Revenue EV/Rev 8.32 4.04
Price to Book Value [P/B] P/B 5.92 2.95
Price to Earnings [P/E] P/E 15.19 20.65
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 1.54 -0.52
Dividend Payout Ratio % Div Payout % (Qtr) 63.90 11.63
Dividend per Basic Share Div per Share (Qtr) 4.07 1.48
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 39.34 18.09
Interest Coverage Int. cover (Qtr) 5.41 -0.01
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 28.59 17.53
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 106.78 23.68
Dividend Growth (1y) % Div 1y % (Qtr) 3.83 2.69
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 24.32 -54.03
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 40.31 -28.53
EBIT Growth (1y) % EBIT 1y % (Qtr) 80.62 -35.16
EBT Growth (1y) % EBT 1y % (Qtr) 134.90 -31.28
EPS Growth (1y) % EPS 1y % (Qtr) 69.87 -55.71
FCF Growth (1y) % FCF 1y % (Qtr) 3.95 9.67
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -6.96 -0.97
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.43 0.70
Cash Payout Ratio Cash Payout (Qtr) 0.20 0.14
Cash Ratio Cash Ratio (Qtr) 0.07 0.36
Current Ratio Curr Ratio (Qtr) 1.34 1.10
Debt to Equity Ratio Debt/Equity (Qtr) 1.38 0.74
Interest Cover Ratio Int Coverage (Qtr) 5.41 -0.01
Times Interest Earned Times Interest Earned (Qtr) 5.41 -0.01
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 27.00 15.42
EBIT Margin % EBIT Margin % (Qtr) 21.34 8.80
EBT Margin % EBT Margin % (Qtr) 17.39 4.90
Gross Margin % Gross Margin % (Qtr) 52.00 48.53
Net Profit Margin % Net Margin % (Qtr) 11.80 2.52