Constellation Brands Inc. (NYSE:STZ)

The financial ratios over the periods indicate various evolving patterns in the company’s leverage and ability to cover interest expenses.

Debt to Equity Ratio

This ratio shows a fluctuating trend from May 2017 through November 2022. Initially, it starts above 1.1, declining to a low of 0.77 by February 2021, indicating a reduction in reliance on equity financing relative to debt. However, from mid-2021 onwards, there is a marked increase, peaking at 1.45 by November 2022, suggesting a rising level of debt relative to equity in the most recent periods.

Debt to Capital Ratio

The debt to capital ratio exhibits a generally similar pattern to the debt to equity ratio but with a narrower range. It declines from about 0.55 in mid-2017 to a trough near 0.43 in early 2021, reflecting a period of deleveraging. Later, it trends upward to 0.59 by late 2022, indicating increased use of debt in the capital structure towards the end of the timeframe.

Debt to Assets Ratio

This ratio follows a slightly smoother pattern. The level decreases from nearly 0.50 in mid-2017 to a low around 0.39 by the start of 2021, implying a weaker dependency on debt in relation to total assets during this time. The ratio rises again towards 0.50 by November 2022, paralleling the other leverage ratios and signaling higher leverage.

Financial Leverage Ratio

The financial leverage ratio also moves in a wave-like manner. It declines gradually from about 2.57 in May 2017 to just below 2.00 in early 2021, then increases substantially afterward, reaching approximately 2.92 in November 2022. This change coincides broadly with the patterns in the debt ratios and illustrates changing levels of overall leverage as the company's funding mix varies over time.

Interest Coverage Ratio

This metric reveals significant volatility across the periods. Initially strong, improving from 7.35 to a peak of 12.29 between May 2017 and February 2019, it then declines sharply. From August 2019 onwards, it plunges into very low levels, even negative figures between February and August 2020, indicating periods where earnings were insufficient to cover interest expenses. Following this trough, the ratio recovers to mid-single digits by early 2021 but again shows fluctuations with a downward tendency until the end of 2022, remaining generally below the initial strong levels.

Overall, the data depicts a company that initially reduced leverage and improved its interest coverage until early 2021 but then increasingly utilized debt financing, reflected by rising leverage ratios and decreasing coverage of interest obligations in recent quarters. The volatility and downward shift in interest coverage during the latter part of the series could raise concerns regarding the sustainability of debt levels and the company’s earnings capacity to meet interest payments in the short term.

The financial data over the reported periods reveals several notable trends in the company's leverage and equity position.

Total Debt

The total debt amount demonstrates a fluctuating pattern with periods of both increase and decrease. Initially, debt increased from approximately $9.2 billion to over $10.1 billion by early 2018. A significant peak was observed in the fourth quarter of 2018, with debt reaching nearly $13.6 billion. Following this peak, there was a gradual reduction trend until early 2021 where the debt lowered to about $10.4 billion. However, from mid-2021 onwards, the debt trend reversed with an upward trajectory, culminating in over $12.1 billion by the end of 2022.

Total CBI Stockholders’ Equity

Stockholders’ equity shows an overall increase through the earlier periods, particularly strong growth from early 2018 through early 2021. Equity rose from around $7.4 billion in mid-2017 to a peak near $13.3 billion in late 2020. After this peak, equity declined steadily through 2021 and 2022, reaching under $8.4 billion by the last reported period. This decline in equity contrasts with the observed rise in total debt during the same recovery period.

Debt to Equity Ratio

The debt to equity ratio fluctuates in line with changes observed in both debt and equity. Initially around 1.25, it decreased to below 1.0 in 2018, reflecting a relatively stronger equity base compared to debt at that time. Ratio spikes were noted in late 2018, coinciding with increased debt levels. The ratio then trended downward to a low of approximately 0.77 in early 2021, indicating reduced leverage and an increased equity buffer. However, the ratio climbed sharply again in 2022, surpassing previous highs and reaching as high as 1.45 by the end of the period, signaling increased leverage and a weaker equity position relative to debt.

In summary, the company experienced cyclical changes in leverage, with periods of deleveraging and equity growth followed by renewed increases in debt and a declining equity base. The rising debt to equity ratio toward the end of the timeline indicates growing financial leverage risks, which may warrant attention in terms of liquidity and capital structure management going forward.

Total Debt

The total debt exhibited notable fluctuations over the observed period. Starting at approximately 9.2 billion US dollars in mid-2017, debt levels showed a general rising trend, peaking near 13.7 billion in late 2018 and early 2019. Following this peak, a declining pattern emerged, with debt decreasing steadily to around 10.4 billion by early 2021. However, from mid-2021 onward, the debt again presented an increasing trajectory, culminating in about 12.2 billion by late 2022. This pattern suggests cycles of borrowing and deleveraging across the quarters.

Total Capital

Total capital followed a broadly similar pattern to debt, beginning at about 16.6 billion US dollars in mid-2017 and rising to a peak slightly above 26 billion in early 2019. Afterward, capital levels declined gradually to under 22 billion by late 2021. Subsequent periods showed relative stabilization, fluctuating around 20.3 to 20.6 billion towards the end of 2022. The initial increase corresponds with the rise in total debt, reflecting capital structure expansion, while later decreases indicate reductions in overall capitalization.

Debt to Capital Ratio

Throughout the timeframe, the debt to capital ratio exhibited variability but remained within a moderate range of approximately 0.43 to 0.59. Initially, the ratio hovered around the mid-0.5 levels with a slight decrease from 0.55 to 0.47 between early 2018 and mid-2018, suggesting a reduction in leverage. A rising trend to 0.55 in late 2018 paralleled the increasing debt levels. Subsequently, the ratio decreased to 0.43 by early 2021, indicating lowered leverage during that period. From mid-2021 forward, the ratio increased again, reaching 0.59 by late 2022, representing higher leverage relative to capital. This fluctuation implies strategic adjustments in financing and capital structure over the periods.

Total debt

The total debt exhibited fluctuations over the analyzed periods. Starting from approximately 9.2 billion USD in the second quarter of 2017, debt levels slightly decreased initially before rising sharply in late 2018, peaking around 13.7 billion USD in the first quarter of 2019. Following this peak, the debt progressively declined over several quarters, reaching a low near 10.4 billion USD by the second quarter of 2021. However, afterward, debt levels gradually increased again, closing at approximately 12.2 billion USD by the end of 2022.

Total assets

Total assets showed a generally upward trend through most periods, beginning at roughly 18.9 billion USD in the second quarter of 2017 and increasing substantially through 2018 and 2019, peaking near 29.2 billion USD in the first quarter of 2019. Afterward, a downward trend is noticeable, with assets gradually decreasing through 2020 and 2021, reaching a lower level near 25.3 billion USD by mid-2021. Towards late 2022, asset values stabilized somewhat around 24.5 billion USD.

Debt to assets ratio

The debt to assets ratio revealed moderate variability throughout the timeline. Beginning at about 0.49 in mid-2017, the ratio declined to a low near 0.39 by early 2021, reflecting a relative reduction in leverage as debt decreased faster than assets. Later periods show an increasing trend in the ratio, surging back to 0.5 by late 2022, indicating that debt growth outpaced or matched asset levels during this interval.

Overall, the analysis indicates that the company experienced a cycle of increasing leverage with growing debt and assets through early 2019, followed by a phase of deleveraging and asset contraction through 2021. The recent trend points to an increase in leverage with rising debt relative to assets, which may warrant further examination of the company's financing strategy and risk exposure.

The financial data reveals several noteworthy trends related to the company's asset base, equity levels, and leverage ratios over the analyzed periods.

Total Assets

Total assets generally increased from approximately 18.96 billion USD in May 2017 to a peak near 29.23 billion USD in February 2019. Subsequently, a declining trend is observed, with total assets reducing to roughly 24.46 billion USD by November 2022. The initial growth phase indicates asset expansion, possibly from acquisitions or organic growth, followed by a period of contraction or asset divestitures over the later years.

Total Stockholders’ Equity

Stockholders’ equity showed an upward trajectory from about 7.39 billion USD in May 2017 to a high of approximately 13.31 billion USD in February 2021. After this peak, equity levels declined significantly, reaching around 8.39 billion USD by November 2022. This pattern suggests strong equity accumulation in the initial years, possibly from retained earnings or capital injections, followed by a downturn which may reflect losses, dividend payments, share repurchases, or other equity-reducing activities.

Financial Leverage Ratio

The financial leverage ratio (total assets divided by total equity) exhibited a declining trend from 2.57 in May 2017 to a low of 1.99 in February 2021. This decline points to a relative reduction in leverage and suggests an improvement in the equity base relative to assets. However, from February 2021 onwards, leverage increased steadily, rising to 2.92 by November 2022. This shift indicates increased reliance on debt or other liabilities for financing, possibly a response to equity reductions and/or changes in asset composition.

In summary, the company experienced a growth phase in both assets and equity up until early 2021, concurrently reducing its leverage ratio, indicating a strengthening financial position during that period. Post-2021, a reversal occurred with declining asset and equity values alongside rising financial leverage, highlighting a shift toward increased financial risk or restructuring of capital sources. These trends warrant further investigation into the underlying causes such as operating performance, financing activities, and strategic decisions impacting the balance sheet.

The financial data reveals several notable trends in the company's earnings before interest and tax (EBIT), interest expense, and interest coverage ratios over the analyzed periods.

Earnings Before Interest and Tax (EBIT)

The EBIT figures demonstrate a volatile pattern throughout the years. From May 2017 to August 2018, EBIT generally increased, peaking at 1,453,400 thousand USD in August 2018. However, there was a sharp decline in November 2018, followed by a recovery reaching a high of 1,648,700 thousand USD by February 2019. Subsequently, EBIT experienced a substantial drop resulting in negative values between May 2019 and November 2019, marking a period of financial strain. From February 2020 onward, the EBIT mostly recovered with fluctuations, including another significant negative value in May 2021, and volatility continuing through the end of 2022 with a mix of positive and negative figures. This variability indicates cyclical challenges possibly influenced by operational or market conditions.

Interest Expense

Interest expense remained relatively stable across the periods, fluctuating modestly between approximately 72,800 thousand USD and 114,600 thousand USD. There is a slight upward trend visible toward the later periods, with the highest figures noted around the end of 2022. This stability contrasts with the more pronounced fluctuations observed in EBIT.

Interest Coverage Ratio

The interest coverage ratio reflects the company's ability to meet interest obligations from operating earnings. Initially, the ratio showed strength, improving from 7.35 in May 2017 to a peak of 12.29 in February 2019, indicating robust earnings relative to interest expense. However, from May 2019, the ratio sharply deteriorated, falling below 2.0 and even turning negative in February 2020, signaling periods where EBIT was insufficient to cover interest expenses. Although there was a recovery post-February 2020, the ratio remained volatile, oscillating between low single digits and slightly above seven, ending the period at approximately 2.7. This suggests persistent challenges in maintaining a comfortable buffer over interest obligations during some quarters.

Overall, the data portrays a company experiencing significant earnings volatility with relatively stable interest expenses. The fluctuations in EBIT have strongly influenced the interest coverage ratio, indicating variable financial health and some periods of potential liquidity or solvency pressure. The recovery phases, while promising, do not fully mitigate the episodic risks highlighted by negative EBIT and low interest coverage ratios in certain quarters.