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Will STZ Deliver Strong Fiscal 1Q18 Sales Growth?



Strong sales growth

Constellation Brands (STZ) has delivered strong sales growth over the past few quarters backed by its strategic acquisitions and the strength of its imported beer portfolio.

Overall, the company’s net sales rose 12% to $7.3 billion in fiscal 2017, which ended on February 28, 2017. With Constellation Brands’ fiscal 1Q18 results around the corner, analysts expect the company’s sales to rise 4.3% to $2.0 billion.

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How STZ performed in the last quarter

In fiscal 4Q17, which ended on February 28, 2017, Constellation Brands delivered net sales of $1.6 billion. The company beat analysts’ consensus sales estimate by 1.9% in fiscal 4Q17. On a year-over-year basis, Constellation Brands’ sales rose 5.5% in fiscal 4Q17, driven by continued demand for its popular Mexican beer brands such as Corona and Modelo. Excluding the impact of currency headwinds, the company’s organic sales growth was 7.0% in fiscal 4Q17.

The company’s Beer segment’s sales rose 10.6% to $891.2 million in fiscal 4Q17. This growth was the result of higher volumes and favorable pricing. The company’s Ballast Point acquisition added another $4.7 million to the Beer segment’s fiscal 4Q17 sales.

The sales of the company’s Wine and Spirits segment remained unchanged at $736.8 million in the quarter. The segment’s organic sales growth and benefits from strategic acquisitions such as the Prisoner and Charles Smith brands were offset by the divestiture of its Canadian wine business in fiscal 4Q17.

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What management expects

Based on guidance issued in April 2017, the company expects its Beer segment to generate sales growth of 9.0%–11.0% in fiscal 2018. This growth expectation is based on continued demand for the company’s imported beer brands.

Sales of the company’s Wine and Spirits business are expected to fall 4.0%–6.0% in fiscal 2018. The expected fall takes into account the impact of the divestiture of the company’s Canadian wine business. The company divested this business to focus on high growth and premium brands.

Peers Anheuser-Busch InBev (BUD) and Molson Coors Brewing Company (TAP) have already reported their first-quarter results. Anheuser-Busch InBev’s 1Q17 organic sales rose 3.7% driven by its revenue management initiatives and the strong performances of its premium brands. Molson Coors’s organic net sales fell 0.5% in 1Q17 due to weak US volumes.

Let’s look at Constellation Brands’ margins in the next part of this series.


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