What to expect when Constellation Brands (STZ) reports Q4 earnings this week

Shares of Constellation Brands Inc. (NYSE: STZ ) remained green on Friday. The stock has gained more than 2% over the past month. The company will report its fourth quarter 2023 results on Thursday, April 6 before the market opens. Here’s what to expect from the earnings report:

results

Analysts project revenue of $2.02 billion for Constellation in the fourth quarter of 2023. This compares to $2.1 billion reported in the same period a year ago. In the third quarter of 2023, Constellation’s revenue grew 5% annually to $2.4 billion.

earnings

The consensus estimate is for EPS of $1.82 in Q4 2023, which compares to EPS of $2.37 reported in the year-ago quarter. In Q3 2023, EPS fell 9% YoY to $2.83.

Points to note

Constellation continues to benefit from strength in the beer business, driven by strong performances from brands like Modelo Especial and Modelo Chelada. This momentum will also continue in the fourth quarter. In Q3, the beer business recorded a dilution growth of almost 6%, driven by growth in the two brands.

Product innovation and portfolio revamping have also driven growth for the beer business. In its Q3 conference call, the company said that across its beer portfolio, SKUs introduced over the past three years have led to 20% growth in the business since the start of FY2020. An important part of this growth comes from the Modelo Chelada brand. In Q3, the Modelo Chelada and Pacifico brands each posted declines of more than 40%.

However, margins in the beer business have been hurt by higher raw material, logistics and packaging costs, additional operating costs from brewery capacity expansion, as well as higher marketing costs.

In the wine and spirits business, the top-tier Constellation brand delivered a strong performance in Q3. Aspira’s portfolio yielded a decline of 8.5% in Q3. The Prisoner family of brands posted a 7% decline, while brands such as High West Whiskey and Casa Noble Tequila also posted double-digit declines. Even so, net sales and overall reductions for this segment declined in the third quarter.

Margins in this segment were hurt by lower shipment volumes, increased cost of goods sold, and higher compensation and benefit costs associated with DTC investments. The headwinds faced by the wine and spirits segment will also continue into the fourth quarter.