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Constellation Brands Seeks Valuation for Its Wine Unit

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Jun. 6 2016, Published 11:59 a.m. ET

Price movement 

Constellation Brands (STZ) has a market cap of $30.7 billion It fell by 0.49% to close at $153.40 per share on June 3, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -2.9%, -3.2%, and 8.2%, respectively, as of the same day. This means that STZ is trading 2.9% below its 20-day moving average, 1.7% below its 50-day moving average, and 8.2% above its 200-day moving average.

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Related ETF and peers

The iShares Russell 3000 (IWV) invests 0.08% of its holdings in Constellation Brands. It tracks a cap-weighted index that measures the investable US equities market, covering the entire market-cap spectrum, including micro-caps. The YTD price movement of IWV was 3.5% as of June 3, 2016.

The market caps of Constellation Brands’ competitors are as follows:

  • Anheuser-Busch InBev (BUD): $207.3 billion
  • Altria Group (MO): $127.8 billion
  • Molson Coors Brewing (TAP): $21.8 billion

Constellation’s valuation for its IPO

In a press release on June 3, 2016, Bloomberg stated, “Constellation Brands Inc., the beer, wine and spirits producer and marketer, is seeking a valuation of roughly C$1 billion ($771 million) for the initial public offering of its Canadian wine business later this year.”

Constellation includes eight wineries and 160 retail locations across Ontario. It also expects to locate in Toronto.

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Constellation’s 4Q16 and 2016 performances

Constellation Brands reported fiscal 4Q16 net sales of ~$1.5 billion, a rise of 13.8% compared to net sales of ~$1.4 billion in fiscal 4Q15. It reported earnings from unconsolidated investments of $22.6 million in fiscal 4Q16, compared to $0.4 million in fiscal 4Q15.

Its net income, EPS (earnings per share) of Class A common stock, and EPS of Class B convertible common stock rose to $243.4 million, $1.19, and $1.10, respectively, in fiscal 4Q16. This compares to $214.6 million, $1.06, and $0.98, respectively, in fiscal 4Q15.

During fiscal 4Q16, the company repurchased ~246,000 shares of common stock for $34 million.

Fiscal 2016 results

In fiscal 2016, Constellation Brands reported net sales of $6.5 billion, a rise of 8.6% year-over-year. It reported a loss on write-off of debt issuance costs of $1.1 million in fiscal 2016, compared to $4.4 million in fiscal 2015.

Its net income, EPS of Class A common stock, and EPS of Class B convertible common stock rose to $1.1 billion, $5.18, and $4.79, respectively, in fiscal 2016, compared to $839.3 million, $4.17, and $3.83, respectively, in fiscal 2015.

STZ’s cash and cash equivalents fell by 24.5%, and its inventories rose by 1.3% in fiscal 2016. Its current ratio and debt-to-equity ratio fell to 1.3x and 1.5x, respectively, in fiscal 2016, compared to 2.6x and 1.6x, respectively, in fiscal 2015.

Projections

Constellation Brands has made the following projections for fiscal 2017:

  • EPS of $6.05–$6.35 on a comparable basis and $6.00–$6.30 on a reported basis
  • interest expense of $325 million–$335 million
  • tax rate of ~29%
  • free cash flow of $250 million–$350 million
  • capital expenditure of $1.3 billion–$1.4 billion

In the next part, we’ll take a look at Under Armour.

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