Constellation Brands Inc. (NYSE:STZ)

Net operating profit after taxes (NOPAT)

The NOPAT values exhibit an initial upward trend from 2017 to 2019, rising from approximately $1.89 billion to about $4.19 billion. However, in 2020, there is a significant decline to a negative figure of approximately -$778 million, indicating a substantial operating loss. Following this drop, NOPAT recovers somewhat in 2021 to around $2.69 billion, but again falls sharply in 2022 to approximately $498 million.

Cost of capital

The cost of capital shows minor fluctuations over the observed years, beginning at 13.13% in 2017 and slightly increasing to 13.75% in 2022. The values remain within a narrow range between approximately 12.03% and 13.75%, with the lowest point recorded in 2020 at 12.03%.

Invested capital

Invested capital demonstrates an upward movement from 2017 through 2019, increasing from about $17.41 billion to nearly $24.89 billion. However, from 2019 onward, there is a downward trend, decreasing to around $21.79 billion in 2020 and continuing to decline gradually to $20.49 billion by 2022.

Economic profit

Economic profit exhibits significant volatility throughout the years. It starts with negative values in 2017 and 2018, approximately -$393 million and -$382 million respectively. In 2019, economic profit turns positive at about $999 million, indicating value creation. Nevertheless, this improvement is followed by a sharp reversal in 2020, plunging to around -$3.4 billion, reflecting substantial value destruction. Small improvements occur in 2021 and 2022 but remain negative, with economic profit values of roughly -$186 million and -$2.32 billion respectively.

Summary of trends

The data reveal a period of growth and value creation up to 2019, characterized by increasing NOPAT, invested capital, and a positive economic profit in that year. Starting in 2020, there is a marked decline in operating profitability and economic profit, alongside reductions in invested capital. Despite some recovery in 2021, results deteriorate again by 2022. The cost of capital remains relatively stable, suggesting that fluctuations in economic profit are primarily driven by changes in operating performance rather than shifts in capital costs. The large negative values in 2020 and 2022 raise concerns about operational challenges and value destruction during these periods.

Net Income (Loss) Attributable to CBI

The net income attributable to the company showed a significant upward trend from 2017 to 2019, increasing from approximately 1.54 billion USD to nearly 3.44 billion USD. This represents a robust growth phase over these three years. However, there was a sharp reversal in 2020, with the company reporting a net loss of about 11.8 million USD. Following this loss, the company returned to profitability in 2021 with nearly 2 billion USD in net income. Yet in 2022, the net income again declined into negative territory, recording a loss of approximately 40.4 million USD. Overall, the data reflects considerable volatility in net income performance, especially post-2019, indicating potential challenges during and after the 2020 period.

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes demonstrated growth from 2017 through 2019, climbing from roughly 1.89 billion USD to over 4.18 billion USD, nearly doubling during this period. This aligns with the increase in net income, indicating strong operational profitability. However, in 2020, NOPAT sharply declined into a significant negative value of approximately 778 million USD, suggesting operational difficulties or extraordinary charges impacting earnings. A recovery occurred in 2021, with NOPAT rising to about 2.69 billion USD, though this was substantially below the 2019 peak. The 2022 figure decreased again to around 498 million USD, highlighting ongoing instability in operating performance after 2019.

Overall Financial Trends

Both net income and net operating profit after taxes exhibited strong growth trends over the initial three-year period, reflecting an expanding and profitable operational phase. The year 2020 marked a critical inflection point, with both metrics showing significant downturns, possibly linked to external disruptions or internal challenges. Although there was a partial rebound in 2021, the company did not regain the peak levels seen in 2019. The subsequent decline in 2022 suggests persistent difficulties in returning to prior performance levels. The volatility captured in these key profitability measures indicates that while the company experienced robust growth earlier, it faced substantial headwinds beginning in 2020, which have had a lasting impact on financial performance.

Income Tax Provision (Benefit)

The income tax provision fluctuates significantly over the periods analyzed. In the year ending February 28, 2017, the provision was substantially high at 554,200 thousand US dollars. This value sharply decreased to 11,900 thousand US dollars in the following year, indicating a substantial reduction in tax expense or a change in tax strategy. In the year ending February 28, 2019, the provision rose again markedly to 685,900 thousand US dollars, reflecting a possible increase in taxable income or changes in tax regulations.

Notably, in the year ending February 29, 2020, there is a negative provision of -966,600 thousand US dollars, suggesting a significant tax benefit or perhaps a reversal of previous tax liabilities. Following this, the provision returned to positive figures in the subsequent years, with 511,100 thousand US dollars in 2021 and a decline to 309,400 thousand US dollars in 2022. The fluctuation highlights varying tax impacts on earnings, potentially influenced by operational performance, tax planning, or extraordinary items during these periods.

Cash Operating Taxes

Cash operating taxes exhibit a general declining trend from 2017 through 2021. Starting at 547,177 thousand US dollars in the year ending February 28, 2017, the cash taxes increased slightly to 553,637 thousand US dollars in 2018, indicating stable or increased tax payments at a cash level. From 2019 onward, a steady decrease is observed with payments dropping to 339,562 thousand US dollars, then continuing to 281,244 thousand US dollars in 2020, and further down to 259,325 thousand US dollars in 2021, which may reflect decreased taxable income or improved tax efficiency.

In the year ending February 28, 2022, there is an increase in cash taxes paid to 302,832 thousand US dollars, suggesting a rebound or change in tax obligations compared to the previous declining trend. This may be indicative of increased earnings or alterations in tax policies impacting the cash tax outflows. Overall, cash operating taxes show more stability and less volatility compared to the income tax provision figures.

Total reported debt & leases

Over the six-year period, total reported debt and leases exhibited substantial fluctuations. From 2017 to 2019, there was a notable increase, rising from approximately 9.63 billion to 14.07 billion USD. This peak was followed by a reduction in 2020 to around 12.75 billion USD, then a further decline in the subsequent years, reaching approximately 10.95 billion USD by 2022. The initial growth phase indicates a possible expansion or increased leverage, while the later decrease may suggest debt repayments or restructuring efforts.

Total CBI stockholders’ equity

Stockholders’ equity demonstrated a generally upward trajectory from 2017 through 2021. Beginning at roughly 6.89 billion USD in 2017, equity increased steadily, reaching a peak of about 13.60 billion USD in 2021. However, in 2022, there was a decline to approximately 11.73 billion USD. This trend suggests an overall strengthening of the equity base over most of the period, with a partial reversal in the most recent year, which could reflect asset revaluations, dividend payments, or other equity-affecting transactions.

Invested capital

Invested capital rose significantly from 2017 to 2019, increasing from roughly 17.41 billion USD to 24.89 billion USD. Subsequently, there was a decline in 2020 to approximately 21.79 billion USD, followed by further decreases to about 21.24 billion USD in 2021 and 20.49 billion USD in 2022. This pattern indicates an initial phase of capital expansion, possibly linked to investments or acquisitions, followed by a contraction phase, which may reflect divestitures, asset impairments, or reduced capital expenditures.

The financial data presents a complex pattern characterized by fluctuations in economic profit, invested capital, and the economic spread ratio over the six-year period.

Economic Profit

The economic profit exhibits significant volatility, starting with negative values in 2017 (-$392.6 million) and 2018 (-$382.5 million), transitioning to a positive figure in 2019 ($999.5 million), followed by a steep decline back to negative territory in 2020 (-$3.4 billion). The losses persist in 2021 and 2022, albeit at lower absolute magnitudes than 2020, reaching -$186.3 million and -$2.3 billion respectively. This trend indicates considerable instability in value generation, with a notable peak in 2019 before substantial downturns.

Invested Capital

Invested capital shows an increasing trend from 2017 ($17.4 billion) through 2019 ($24.9 billion), with a peak in 2019 followed by a decline in the subsequent years, down to $20.5 billion by 2022. This suggests an initial phase of capital expansion followed by a gradual reduction, possibly reflecting reallocation or divestment activities post-2019.

Economic Spread Ratio

The economic spread ratio mirrors the volatility seen in economic profit. Negative spreads persist in 2017 and 2018 (-2.25% and -2.06%), turning positive in 2019 (4.02%), which correlates with the positive economic profit of that year. However, it then deteriorates sharply in 2020 to -15.6%, recovers partially in 2021 (-0.88%), and declines again in 2022 (-11.32%). These fluctuations highlight challenges in achieving returns above the cost of capital consistently.

Overall, the data reveals a period marked by unstable economic performance, with a peak in 2019 that was not sustained. The decline in invested capital after 2019 and subsequent negative economic spreads and profits suggest difficulties in maintaining profitable growth and capital efficiency throughout the more recent years analyzed.

Adjusted Net Sales

The adjusted net sales demonstrate a consistent upward trend over the six-year period. Starting at approximately 7.33 billion USD in 2017, sales increased annually, reaching nearly 8.94 billion USD by 2022. This steady growth indicates a positive sales performance and potential market expansion or increased product demand.

Economic Profit

Economic profit figures exhibit considerable volatility throughout the period. In 2017 and 2018, the economic profit was negative, with values around -393 million USD and -382 million USD respectively, indicating economic losses. A significant improvement occurred in 2019, with economic profit turning positive to approximately 999 million USD. However, this was not sustained, as the economic profit sharply declined to a large negative figure of about -3.4 billion USD in 2020. Subsequently, there was a partial recovery to a smaller negative economic profit near -186 million USD in 2021, followed by another substantial decline to roughly -2.3 billion USD in 2022. These fluctuations suggest challenges in maintaining profitable operations from an economic profit perspective, potentially linked to external factors or internal cost management issues.

Economic Profit Margin

The economic profit margin aligns with the economic profit’s volatility, reflecting negative margins in 2017 (-5.36%) and 2018 (-5.04%), a strong positive margin in 2019 (12.31%), followed by a steep drop into negative territory again in 2020 (-40.75%). In 2021, the margin marginally improved but remained negative at -2.16%, then worsened significantly in 2022 to -25.95%. The margin trends underline the company’s struggles to generate substantial economic profit relative to its sales, with a brief period of positive performance in 2019 overshadowed by more substantial negative results before and after that year.