Constellation Brands (NYSE: STZ) shows alcohol could be a pandemic-proof industry.
For instance, Constellation’s quarterly revenues grew from $1.902 billion on 29 February 2020 to $2.438 billion on 30 November 2020. Similarly, Constellation’s quarterly operating income grew from $545.10 million on 29 February 2020 to $783.10 million on 30 November 2020.
In addition, Constellation’s quarterly gross profit grew from $949.80 million on 29 February 2020 to $1.268 billion on 30 November 2020. Interestingly, the gross profit, income, and revenues at Constellation (STZ) grew despite shrinking revenue growth.
In the quarter ending on 29 February 2020, Constellation’s revenue growth rate was 5.88%. Stockrow estimates Constellation’s quarterly revenue growth rate fell to -6.38% on 31 May 2020 and 3.57% on 31 August 2020. However, the quarterly revenue growth rate rose to an impressive 21.94% on 30 November 2020.
Why is Constellation Brands Growing in a Pandemic?
Constellation Brands (STZ) shows the coronavirus is good for alcohol sales.
COVID-19 closed Bars, restaurants, and other drinking establishments. However, Americans have fewer restrictions on alcohol consumption because of lockdown.
For instance, a person drinking at home does not have to worry about driving under the influence (DUI). Instead, you can finish off the bottle or drink that second cocktail at home.
Additionally, alcohol is cheaper at home. There is no tip or bar to pay for. Hence, a person who normally consumes one drink can buy a whole bottle or six-pack.
Home alcohol consumption booms
Home alcohol consumption is booming. The International Wine and Spirits Record (IWSR) predicts U.S. online alcohol sales will grow by 80% in 2020. The IWSR estimates US online alcohol sales could grow from $3 billion in 2019 to $5.6 billion in 2020.
Note: I think online alcohol sales could be larger because these numbers do not include drinks ordered from bars. To explain, many American bars and restaurants now offer pickup and delivery of alcoholic beverages.
Moreover, I think Constellation’s financial numbers show the US alcohol business is recovering from coronavirus. In April 2020, Nielsen estimated that US alcohol sales needed 22% volume growth to sustain losses from closed bars.
To elaborate Stockrow estimates Constellation Brands’ (STZ) revenues grew by 21.94% in the quarter ending on 30 November 2020. Hence, Constellation’s revenues almost grew by the 22% rate, Nielsen’s experts think is necessary for a recovery.
What is Constellation Brands?
I think Constellation Brands (NYSE: STZ) is well-positioned to profit from an alcohol recovery.
For instance, Constellations’ stable of products includes: the popular Corona Beer, Corona seltzer, Mi Campo Tequilas, Casa Noble Tequila, Modelo Beer, Funky Buddha, Kim Crawford Wines, Robert Mondavi wines, Ruffino wines, Cooper & Thief Wines, Seven Moons Wines, Black Velvet Whiskey, SVEDKA Vodka, Nelson’s Green Briar Bourbon, and more.
I think Constellation Brands is in a powerful position to profit from coronavirus because of its focus on premium alcohol brands. To explain, I think people will buy and drink more premium alcohol at home because they can spend more money on booze.
In addition, some of Constellation’s products such as SVEDKA Vodka and Tequila are among Americans’ favorite hard liquors. Hence, Constellation has the booze Americans want. In addition, Corona is one of the most popular beers.
Does Constellation Brands Make Money?
Constellation (NYSE: STZ) generates cash from its business. For instance, Constellation reported a quarterly operating cash flow of $919 million on 30 November 2020.
In 2020, Constellation’s quarterly operating cash flow grew from $475 million on 29 February 2020 to $687 million on 31 May 2020 and $748.40 million on 31 August 2020. However, Constellation’s quarterly ending cash flow was -$51.7 million on 30 November 2020.
Notably, Constellation only reported one positive quarterly ending cash flow in 2020, $302.80 on 31 May 2020. In contrast Constellation reported negative quarterly ending cash flows of -$123 million on 29 February 2020 and -$98.20 million on 31 August 2020.
However, Constellation reported negative quarterly financing cash flows throughout 2020. For example, -$782.6 million on 30 November 2020. I think that means Constellation is paying off debts.
Consequently, Constellation Brands’ total long-term debt fell from $11.211 billion on 29 February 2020 to $10.416 billion on 30 November 2020.
What Value Does Constellation Brands have
I question Constellation Brands’ (STZ) value because it only had $152.90 million in cash and short-term investments on 30 November 2020.
However, Constellation Brands had total assets of $27.631 billion on 30 November 2020. In 2020, Constellation’s Total Assets grew from $27.323 billion on 29 February 2020.
On the other hand, I consider Constellation Brands Inc. (NYSE: STZ). Overvalued. For instance, Mr. Market paid $224.57 for Constellation shares on 13 January 2021. In 2020, the STZ share price grew from $216.74 on 12 January 2020.
I cannot consider a company with $27.631 billion worth $224.57 a share. However, Constellation Brands is an excellent dividend stock.
Constellation Brands is an Excellent Income Stock
For example, Constellation will pay a 75¢ dividend on 23 February 2021. Dividend.com reports Constellation Brands has paid a 75¢ dividend for over a year. Overall, Constellation offered an annualized dividend of $3 and a dividend yield of 1.31% on 12 January 2021.
In the final analysis, I think Constellation Brands (STZ) is is an excellent income stock with a high margin of safety. I think Constellation Brands has a high margin of safety because there will always be a demand for its product alcohol.
In addition, I think the dark and crazy times we live in will increase demand for that product. To explain, if you have no reason to drink now, all you need to do to get one is glance at the news. You will reach for the nearest bottle after watching the news.
If you want an excellent income stock or a consumer products company that is pandemic proof, check out Constellation Brands.
Originally published at https://marketmadhouse.com on January 13, 2021.
