Constellation Brands, Inc.

Given the impact of inflationary headwinds encountered throughout the year, Constellation Brands’ financial performance was not up to expectations. The company delivered a 7% increase in net sales in the quarter which was below expectations along with a 3% increase in comparable operating income which resulted in an earnings beat. Constellation Brands achieved record net sales of $9.5 billion and equivalent operating profits of $3 billion for the year. In the quarter, the beer business expanded by double digits in net sales and shipment volume while maintaining best-in-class margins. They also gained traction for their anchor brands. Modelo Especial increased depletions by 9%. It is worth highlighting that the Modelo Chelada franchise saw significant growth due to a number of consumer-driven improvements. The company added more than 1.6 million new cases of depletions to its Chelada brands with the addition of the Naranja Picosa flavor. Furthermore, the Fine Wine and Craft Spirits brands, part of the Aspira portfolio, saw double-digit shipment growth. Their Ignite portfolio also continued to fuel the momentum of Constellation’s premium brands, including Meiomi and Kim Crawford, which produced 5% and 7% depletion growth, respectively, while gaining a share in their respective markets. We give Constellation Brands a ‘Hold’ rating with a revised target price.