Constellation Brands (STZ) investors are betting that Americans will drink more alcohol in the years ahead. To explain, Constellation markets several popular brands of beer, wine, tequila, vodka, and whiskey.
Constellation’s highest-profile product is the popular Corona Beer. It also produces the Modelo, Victoria, Two Lane, Local Buzz, and Funky Buddha beers. Other products include Robert Mondavi Wines, Mount Veeder wines, Schrader wines, Simi Wines, Empathy Wines, Ruffino, Meiomi Wines, Fresca Hard Seltzers, Kim Crawford Wines, Woodbridge Wines, Cook’s Champagne, SVEDKA Vodka, Casa Noble Tequila, High West Whiskey Mi Campo, and Nelson’s Green Brier Whiskey.
What is America Drinking?
The bet at Constellation is that America’s beer, wine, and spirits consumption will increase. That is a safe bet, US beer consumption rose from 2.806 million thousand gallon cases in 2019 to 2.829 million thousand gallon cases in 2020 to 2.870 million thousand gallon cases in 2021, Statista estimates.
US off-premises spirits (hard liquor) consumption grew by 29% between 2019 and 2021, Nielsen IQ estimates. Vodka and Tequila are America’s drinks of choices, PennStateExtension estimates. Vodka consumption grew by 4.9% and tequila/mezcal consumption grew by 30.1% between 2019 and 2021.
In contrast, US wine consumption is falling. For example, Silicon Valley bank estimates US wine consumption fell by 8.9% in the last three months of 2021. Hence, Constellation Brands can take advantage of some changing trends in American drinking.
Is Constellation Brands Making Money?
Investors are interested in Constellation Brands (NYSE: STZ) because its share price is stable. For example, Mr. Market paid $243.44 for Constellation on 18 January 2022 and $219.60 for it on 18 January 2023.
This price seems high. However, Constellation is growing and making money. For example, Constellation reported a quarterly gross profit of $1.238 billion and a quarterly operating income of $746.7 million on 30 November 2022. The quarterly gross profit grew from $1.23 billion on 30 November 2021, but the quarterly operating income fell from $839.90 million on 30 November 2021.
In contrast, the quarterly revenues grew from $2.321 billion on 30 November 2021 to $2.437 billion on 30 November 2022. Stockrow estimates Constellation’s revenues grew by 5% in the quarter ending on 30 November 2022.
The revenues grew in each quarter of 2022. For example, the revenues grew by 12.02% in the quarter ending on 31 August 2022, 16.65% in the quarter ending on 31 May 2022, and 7.68% in the quarter ending on 28 February 2022.
How Much Cash is Constellation Generating?
Constellation Brands (STZ) generates some cash. It reported a $626.30 million quarterly operating cash flow on 30 November 2023. The quarterly operating cash flow fell from $918.20 million on 30 November 2021.
Similarly, the quarterly ending cash flow fell from $257 million on 30 November 2021 to $19.90 million on 30 November 2021. Constellation is paying off some debt. It reported a quarterly financing cash flow of -$447.30 million on 30 November 2021. The quarterly financing cash flow changed from -$361.50 million on 30 November 2021.
Constellation has a tiny amount of cash. It reported $185 million in cash and short-term investments on 30 November 2022. The cash and short-term investments fell from $361.30 million on 30 November 2021.
Conversely, Constellation has more debt. Its total debt grew from $10.332 billion on 30 November 2021 to $12.172 billion on 30 November 2022. Thus, Constellation finished 2022 with more debt and less cash.
What Value does Constellation Brands offer?
Constellation Brands (STZ) lost value in 2022. Its Total Assets fell from $25.527 billion on 30 November 2021 to $24.463 billion on 30 November 2022.
I cannot call Constellation Brands a value investment because it loses value and generates a low level of cash. Moreover, Constellation is adding debt it could not pay.
Nothing, not even the six 80₵ quarterly dividends Constellation has scheduled between 22 February 2024, can redeem Constellation in my mind. I consider this stock overpriced and cash-poor. My prediction is Constellation brands could run out of cash and collapse. I advise investors to avoid STZ. Americans could drink more alcohol, but Constellation is in no position to cash in on that trend.
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