Constellation Brands, Inc. :STZ-US: Earnings Analysis: Q3, 2017 By the Numbers : January 10, 2017

Constellation Brands, Inc. reports financial results for the quarter ended November 30, 2016.

We analyze the earnings along side the following peers of Constellation Brands, Inc. – Brown-Forman Corporation Class B (BF.B-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 1,810.20 million, Net Earnings of USD 405.90 million.
  • Gross margins widened from 46.65% to 49.55% compared to the same period last year, operating (EBITDA) margins now 33.91% from 32.72%.
  • Year-on-year change in operating cash flow of 28.53% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-11-30 2016-08-31 2016-05-31 2016-02-29 2015-11-30
Relevant Numbers (Quarterly)
Revenues (mil) 1810.2 2021.1 1871.7 1543.2 1639.8
Revenue Growth (%YOY) 10.39 16.62 14.7 13.79 6.45
Earnings (mil) 405.9 358.9 318.3 243.4 270.5
Earnings Growth (%YOY) 50.06 18.68 33.4 13.42 21.74
Net Margin (%) 22.42 17.76 17.01 15.77 16.5
EPS 1.77 1.57 1.55 1.07 1.32
Return on Equity (%) 22.91 20.27 18.61 14.65 16.96
Return on Assets (%) 9.01 8.12 7.36 5.88 6.8

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Market Share Versus Profits

Revenues History
Earnings History

STZ-US‘s change in revenue this period compared to the same period last year of 10.39% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that STZ-US is holding onto its market share. Also, for comparison purposes, revenues changed by -10.43% and earnings by 13.10% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 46.65% to 49.55% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 32.72% to 33.91% compared to the same period last year. For comparison, gross margins were 48.66% and EBITDA margins were 34.47% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

STZ-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 44.70 days from 95.99 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

STZ-US‘s change in operating cash flow of 28.53% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 29.60% to 30.40% and (2) one-time items. The company’s pretax margins are now 26.73% compared to 24.33% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Constellation Brands, Inc.

Company Profile

Constellation Brands, Inc. engages in the production, marketing and distribution of beverage alcohol products. It operates through the following segments: Beer, Wine and Spirits, and Corporate Operations and Other. The Beer segment includes Coreona Extra, Corona Light, Modelo Especial, Pacifico, Negra Modelo, Victoria, and Ballast Point brands. The Wine and Spirits segment produces and markets premium wine including table wine, sparkling wine, and dessert wine; and imports SVEDKA Vodka. The Corporate Operations and Other segment comprises of traditional corporate-related items including executive management, corporate development, corporate finance, human resource, internal audit, investor relations, legal, public relation, and information technology. The company was founded by Marvin Sands in 1945 and is headquartered in Victor, NY.

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