Constellation Brands (STZ, Financial) had more than one reason to celebrate this National Beer Day, thanks to its beer segment's exceptional performance. The company's Q4 earnings highlighted the continued demand for its premium Mexican beer brands, such as Modelo Especial and Pacifico, which significantly outperformed the competition.
The beer segment of STZ witnessed nearly an 11% growth in net sales, with a 9% increase in depletions, indicating an acceleration from the previous quarter's 4% net sales growth. Notably, Modelo Especial, Pacifico, and Corona Extra saw Q4 depletion growth rates of 14%, 22%, and 1%, respectively. This surge is partly attributed to the challenges faced by Anheuser-Busch InBev (BUD, Financial), which helped Modelo Especial surpass Bud Light as the top-selling beer in the U.S. STZ's earnings report emphasized its leadership in dollar sales share gains within the beer category and the high-end segment.
Looking ahead to FY25, STZ is optimistic, projecting a 7-9% net sales growth for its beer business. This forecast is supported by cost-saving measures, reduced marketing expenses, favorable pricing, and a 30 basis points increase in beer operating margin in Q4. The consistent demand for STZ's beer brands has allowed the company to present a bullish outlook for FY25, with expected enterprise net sales growth of 6-7% and EPS ranging from $13.50 to $13.80.
However, STZ's wine and spirits segment faced a 6% decline in net sales in Q4, primarily due to weak market conditions affecting its premium brands. Despite this, the company remains focused on its turnaround strategy, emphasizing divestment from lower-priced brands and investment in premium ones like The Prisoner Wine Company, Meiomi, and Casa Nobel Tequila. STZ anticipates a stabilization in the wine and spirits market in FY25, with net sales forecasts ranging from a 0.5% decline to a 0.5% increase. Additionally, a 14% increase in net sales in international markets signals a positive rebound.
In conclusion, STZ's beer segment continues to drive the company's success, balancing the ongoing challenges in the wine and spirits division. With an optimistic outlook for FY25, STZ expects improvements in net sales across all segments.
