Constellation Brands Inc. (NYSE:STZ)

The analysis of the financial performance over multiple quarters reveals several notable trends in the key financial ratios observed.

Return on Assets (ROA)

The ROA demonstrated a generally strong performance in the early periods, reaching peaks around May and August 2018 with values above 11%. However, a significant decline occurred in the periods from May 2019 through February 2020, including a brief negative value in February 2020, indicating challenges in asset efficiency during this time. A recovery phase followed through late 2020 and early 2021, but subsequent periods showed volatile and mostly diminished returns, often near zero or slightly negative. This suggests fluctuating asset utilization effectiveness, with instability particularly evident in the more recent quarters.

Financial Leverage

Financial leverage ratios depict a relatively stable trend with minor variations. The ratio fluctuated between approximately 2.14 and 2.57 in the earlier years, indicating moderate use of debt to finance assets. A gradual decrease in leverage is noticeable towards early 2021, suggesting a conservative shift in capital structure or debt reduction strategies. Notably, in the latest quarters, an upward trend reemerges, peaking near 2.92, which could reflect increased borrowing or a change in financing policies, potentially to support growth or manage cash flow amid operational challenges.

Return on Equity (ROE)

ROE followed a pattern similar to ROA but with greater volatility. Initially strong, with peaks nearing 29% in mid-2018, ROE experienced a considerable downturn starting mid-2019, including negative values in the early 2020 period. This indicates reduced profitability available to shareholders, potentially related to operational inefficiencies or financial costs. Recovery signs are evident in late 2020 into early 2021, yet the ratio notably declined again in late 2021 and 2022, often hovering close to zero or negative territory. This implies ongoing difficulties in generating returns on equity, likely influenced by fluctuating net income and changes in financial leverage.

In summary, the company’s financial metrics experienced a strong initial phase, followed by a period of volatility and decline around 2019 to early 2020. Although some recovery occurred subsequently, the recent quarters suggest instability in profitability and returns, accompanied by changing leverage ratios. These trends highlight challenges in maintaining consistent asset efficiency and shareholder value over the evaluated periods.

The analysis of the quarterly financial indicators over the period reveals distinctive trends and fluctuations in profitability, efficiency, and financial structure.

Net Profit Margin

The net profit margin shows considerable variability, with an overall upward trend from mid-2017 through early 2019. It peaks around February 2019 at over 42%, indicating strong profitability during this interval. However, a sharp decline follows, reaching negative territory around early 2020 and again in late 2021 and early 2022, reflecting periods of reduced profitability or losses. Subsequently, margins recover partially by mid-2020 and fluctuate modestly thereafter, albeit remaining relatively low compared to earlier peaks.

Asset Turnover

This ratio remains relatively stable across the quarters, mostly ranging from 0.28 to 0.39. A slight declining trend is observed from 2017 into early 2019, indicating possible decreases in efficiency in using assets to generate sales. Post-2019, the asset turnover stabilizes and marginally increases toward the most recent periods, suggesting some improvement or stabilization in asset utilization efficiency.

Financial Leverage

Financial leverage demonstrates modest fluctuations without a clear directional trend for most of the analyzed period. Starting around 2.57 in mid-2017, leverage declines gradually through mid-2021, reaching a low near 1.99, indicating a reduction in reliance on debt relative to equity. However, later quarters exhibit increased leverage again, climbing back to nearly 2.92 by late 2022, which may imply a strategic shift toward higher debt usage or changes in capital structure.

Return on Equity (ROE)

ROE trends largely parallel those of net profit margin, given their interrelation, showing strong performance until early 2019 with values exceeding 25%. Following this period, ROE experiences a sharp contraction reaching close to zero or negative values during early 2020 and early 2022, reflecting the impact of decreased profitability or operational challenges. Thereafter, ROE demonstrates partial recovery but remains subdued compared to earlier peaks.

In summary, the company experienced a strong phase of profitability and operational efficiency through early 2019, followed by considerable volatility characterized by sharp profit margin contractions and fluctuating returns on equity. Asset turnover and financial leverage remain moderately stable, exhibiting only gradual changes that suggest careful adjustments in asset utilization and capital structure. The data indicates periods of financial strain or challenges, particularly around 2020 and again in 2021-2022, with partial recoveries thereafter.

Tax Burden

The tax burden ratio remained relatively stable around 0.77 to 1.1 from mid-2017 through mid-2019, except for a notable spike to 13.04 in November 2019. Subsequently, data is missing for some periods, with the ratio fluctuating lower and even turning negative in May and August 2022, before slightly recovering towards the end of 2022. This volatility suggests fluctuations in taxable income or tax expenses impacting net income.

Interest Burden

The interest burden ratio showed consistent strength from 2017 to early 2019, remaining mostly between 0.86 and 0.92, indicating relatively stable interest expenses compared to operating profit. However, this ratio dropped sharply to 0.12 in November 2019, indicating a significant increase in interest expenses or decreased operating income. After missing values for some periods, the ratio partially recovered but remained volatile and below historical levels through 2022.

EBIT Margin

The EBIT margin exhibited generally positive values, increasing from around 33% to a peak of 55% in early 2019. However, starting late 2019, a sharp decline occurred, reaching negative values in early 2020. Following this drop, EBIT margins gradually recovered, returning to positive though moderate values by 2021 and fluctuating around 7% to 23% through 2022. This pattern indicates the company faced significant operational challenges or extraordinary costs during late 2019 and early 2020, with gradual improvements thereafter.

Asset Turnover

Asset turnover demonstrated a slight downward trend from 0.39 in 2017 to about 0.28-0.29 in late 2018 and early 2019, suggesting reduced efficiency in using assets to generate revenue. From mid-2019 onwards, the ratio stabilized and gradually increased to 0.35-0.39 by late 2022, indicating some improvement in asset utilization over time despite earlier declines.

Financial Leverage

Financial leverage reduced from about 2.57 in mid-2017 to around 2.08-1.99 by early 2021, indicating a trend toward lower reliance on debt financing. However, from mid-2021 onwards, leverage increased again, reaching a peak near 2.92 in late 2022. This suggests a return to higher debt levels, potentially to support operational or growth activities following earlier downturns.

Return on Equity (ROE)

ROE was relatively strong and stable from 2017 through early 2019, generally ranging from about 22% to nearly 29%. A steep decline occurred in late 2019 and early 2020, with ROE dipping near zero or slightly negative, mirroring the operational challenges visible in EBIT margin. Subsequently, ROE showed partial recovery, reaching approximately 15% in late 2020 and early 2021, but again declined after mid-2021 to near breakeven levels by late 2022. This trend reflects the combined effects of operational difficulties, tax and interest burdens, and profitability variability impacting shareholder returns over this period.

The analyzed data displays key financial performance ratios over multiple quarters, highlighting fluctuations and trends relevant to operational efficiency and profitability.

Net Profit Margin

The net profit margin demonstrates notable volatility across the periods. Initially, margins improved steadily, rising from approximately 22% to a peak exceeding 42% in early 2019. This peak was followed by a sharp decline through mid-2019 and into early 2020, with margins dropping near zero and even slightly negative. A recovery phase is evident from mid-2020 to early 2021, with margins increasing back above 23%. However, subsequent quarters saw renewed downward pressure, with margins again turning slightly negative before a modest rebound toward just above 1% in late 2022. The fluctuations suggest variable profitability influenced by operational or market factors impacting cost management or revenue generation.

Asset Turnover

Asset turnover ratios exhibit a generally declining trend from mid-2017 to the first quarter of 2019, falling from 0.39 to 0.28. This reduction indicates diminished efficiency in using assets to generate sales during that interval. Beginning mid-2019, a gradual improvement occurred, with turnover ratios steadily rising to 0.39 by the end of 2022. This suggests an enhanced utilization of assets in recent periods, potentially reflecting better management of asset base or increased sales volumes relative to assets employed.

Return on Assets (ROA)

The return on assets corresponds closely with the net profit margin trend, demonstrating initial growth from 8.54% to above 11% through early 2018, peaking again at around 13.7%. A decline is observable through 2019 and early 2020, with ROA approaching zero and even marginal negative percentages reflecting impaired asset profitability. Thereafter, ROA recovered to approximately 7.3% by early 2021 before decreasing towards nearly zero again in subsequent quarters. The late 2022 periods show small positive values, indicating slight improvements in asset profitability despite ongoing challenges.

Overall, the financial ratios reveal a period of strong profitability and asset efficiency up to early 2019, followed by significant disruption with sharp declines in profitability and asset returns through 2020. Recovery trends appear intermittently thereafter, with asset utilization showing improvement toward the end of the timeline. The patterns suggest cyclical pressures potentially linked to external market conditions or internal operational changes affecting overall financial health.

The financial data reveals several notable trends across the periods observed. Overall, the metrics indicate fluctuations in profitability, efficiency, and financial burden that reflect varying operational and financial conditions over time.

Tax Burden

The tax burden ratio shows significant variability, with generally stable values close to or slightly below 1.0 from mid-2017 through early 2019, suggesting consistent effective tax rates relative to pre-tax income. However, there is a pronounced spike in November 2019 reaching an abnormally high value, indicating either an accounting anomaly or a one-time tax effect. Following this, the ratio declines and remains below 1.0, even entering negative territory in mid-2022, which may suggest tax benefits or losses exceeding taxable income during that time frame.

Interest Burden

Interest burden ratios remain relatively stable in the 0.85 to 0.92 range during 2017 and 2018, indicating manageable interest expenses relative to earnings before interest and taxes. In late 2019 and early 2020, there is a sharp decline, hitting a low of approximately 0.12, which points to substantially increased interest expenses or decreased earnings leading to higher financial leverage pressure. The ratio partially recovers afterward but remains below historical highs, oscillating between roughly 0.4 and 0.8 in recent periods, implying sustained but reduced interest burden.

EBIT Margin

Earnings before interest and taxes margins show an overall downward trend when moving from 2017 to the early part of 2020, with margins peaking around 55% in early 2019 but then sharply declining to negative margins by February 2020. This negative trend aligns with the period of economic disruption globally. Subsequent quarters reveal recovery, with margins rising back to mid-30% levels in early 2021, followed by a gradual decrease throughout 2021 and 2022 to single-digit percentages. This suggests ongoing challenges to profitability but a partial rebound from the low point.

Asset Turnover

The asset turnover ratio declines modestly from 0.39 in mid-2017 to a low around 0.28 in late 2018 and early 2019, indicating reduced efficiency in asset utilization to generate sales during that period. From early 2020 onward, the ratio remains relatively constant around 0.31, with slight incremental increases in 2021 and 2022 reaching back close to 0.39, indicating a slow but steady improvement in asset efficiency in recent periods.

Return on Assets (ROA)

ROA generally trends downward from a high of approximately 11.5% in early 2018 to near zero or slightly negative from late 2019 through early 2020, consistent with observed drops in EBIT margin and increased burdens. There is a moderate recovery starting mid-2020, with ROA reaching around 7.4% in early 2021. Nevertheless, this recovery is not sustained strongly, as ROA declines again in 2021 and 2022, even turning negative in mid-2022, highlighting ongoing profitability challenges from asset investments despite improving asset turnover.

In summary, the financial trends indicate the company experienced a period of robust profitability and efficiency through 2018, followed by sharp deterioration coinciding with global economic disruptions in 2020. Subsequent data show partial recoveries in profitability and asset management metrics, yet financial burdens such as interest expenses remain elevated and ROA ratios demonstrate instability. These patterns suggest the company faced significant challenges in maintaining operational and financial efficiency over the periods analyzed, with some improvement in recent quarters but lingering issues affecting overall returns.

The financial analysis over the presented periods reveals several notable trends and fluctuations in key profitability and burden ratios.

Tax Burden

The tax burden ratio demonstrates considerable variability across quarters. Initially, it remained relatively stable around 0.77 to 0.99 from mid-2017 through early 2018, peaking unusually at 13.04 in late 2019, which appears as an outlier. Subsequently, the ratio decreased sharply and fluctuated thereafter, even reaching negative values in 2022, suggesting potential tax credits or adjustments impacting the effective tax rate in those periods.

Interest Burden

The interest burden ratio maintained a fairly steady trend near the high 0.80s to low 0.90s through most of the early periods, indicating consistent levels of interest expense relative to earnings before interest and taxes. However, there was a significant dip starting from late 2019, bottoming around 0.12, which signals a sharp increase in interest costs or reduced earnings before interest. While some recovery occurred afterward, this ratio remained volatile and below earlier levels, with occasional low points around 0.42 to 0.43 in 2022, highlighting periods of increased financial burden from interest expenses.

EBIT Margin

The EBIT margin exhibited strong performance through early 2019, peaking above 55% at one point, reflecting robust operational profitability. Following this, there was a marked decline with margins turning negative in early 2020, indicating operational challenges and possible impacts from external disruptions. Recovery efforts are visible later in 2020 and into 2021 with margins returning to positive territory, although remaining notably below previous highs. By 2022, EBIT margins again declined to low single digits, showing persistent operational pressures or cost increases.

Net Profit Margin

Net profit margins mirrored the EBIT margin trend with high profitability in early periods, exceeding 40% at times. A sharp decline is observed starting in late 2019, plunging below zero in early 2020, signifying net losses likely due to extraordinary conditions or expense surges. While a recovery phase is evident through late 2020 and into 2021, with margins moving back above 20%, the trend reversed in 2022 with margins falling back near or below zero, indicating renewed profitability challenges.

Overall, the data reflect strong operational and net profitability in the initial years, followed by significant disruptions around late 2019 and early 2020 leading to negative profit metrics. Though some recovery occurred through 2021, sustained margin pressures and increased financial burdens, particularly related to interest and tax components, have impacted profitability in more recent quarters.