Constellation Brands Inc. (NYSE:STZ)

Debt to Equity

The debt to equity ratio shows a clear downward trend from 1.34 in 2017 to 0.77 in 2021, indicating a reduction in the company's reliance on debt relative to shareholders' equity over these years. In 2022, there is a slight increase to 0.89, suggesting a modest uptick in debt usage. Including operating lease liabilities, similar patterns are observed with ratios declining from 1.34 in 2017 to 0.81 in 2021 before rising to 0.93 in 2022.

Debt to Capital

This ratio decreases steadily from 0.57 in 2017 to 0.43 in 2021, reflecting a strengthening capital structure with lower dependency on debt financing. In 2022, a small increase to 0.47 occurs, indicating slightly more debt in the capital mix. When including operating lease liabilities, the ratio trends similarly, moving from 0.57 in 2017 to 0.45 in 2021, and increasing marginally to 0.48 in 2022.

Debt to Assets

The debt to assets ratio declines gradually from 0.50 in 2017 to 0.39 in 2021, signifying an improvement in the proportion of assets funded by debt. There is a minor increase to 0.40 in 2022. Including operating lease liabilities, the ratio behaves comparably, reducing from 0.50 in 2017 to 0.41 in 2021, then slightly rising to 0.42 in 2022.

Financial Leverage

Financial leverage demonstrates a consistent decrease from 2.7 in 2017 to 1.99 in 2021, indicating a reduction in the use of debt relative to equity. A subsequent uptick to 2.2 in 2022 suggests a modest increase in leverage, though still below earlier levels.

Interest Coverage

Interest coverage ratio improves from 7.28 in 2017 to a peak of 12.29 in 2019, which reflects growing ability to meet interest obligations. However, the ratio sharply deteriorates to -1.2 in 2020 indicating inability to cover interest expenses during that year. Recovery occurs in 2021 with a ratio of 7.59, but it declines again in 2022 to 1.87, suggesting fluctuating interest payment capacity and increased financial risk.

Fixed Charge Coverage

Fixed charge coverage ratios follow a similar trajectory as interest coverage, rising from 6.33 in 2017 to 10.63 in 2019, indicating strong capacity to cover fixed charges. The ratio turns negative to -0.79 in 2020, signaling financial distress. It improves to 6.31 in 2021 but subsequently decreases to 1.7 in 2022, underscoring volatility in the company’s ability to meet fixed financial obligations over this period.

The financial data reveals notable trends in the company's debt and equity structure over the six-year period ending February 28, 2022.

Total Debt

The total debt exhibits significant fluctuations. Starting at approximately 9.24 billion US dollars in 2017, total debt increased sharply to about 13.6 billion by 2019. Following this peak, it decreased to roughly 10.4 billion by 2021, mostly stabilizing around this level through 2022. This pattern suggests a phase of increased borrowing followed by active debt reduction or stabilization in recent years.

Total Stockholders' Equity

Stockholders' equity shows a consistent upward trend from 6.89 billion in 2017 to a peak of nearly 13.6 billion in 2021. However, in 2022, equity declined to about 11.7 billion. The overall increase until 2021 indicates strengthened capital base and possibly retained earnings growth or equity financing, while the recent decline could reflect a write-down, dividend payments, or other equity-impacting events.

Debt to Equity Ratio

The debt to equity ratio steadily declines from 1.34 in 2017 to a low of 0.77 in 2021, suggesting an improving balance between debt and equity financing with reduced leverage and enhanced financial stability. In 2022, the ratio slightly increased to 0.89, potentially reflecting the combination of increased debt relative to equity or the decrease in equity noted previously.

Overall, the data depicts a company that initially increased its leverage significantly but then undertook measures to reduce debt and strengthen equity, improving the leverage ratio significantly by 2021. The slight uptick in leverage in the most recent year may warrant closer monitoring to understand the underlying causes and implications for financial risk.

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

Total Debt (including operating lease liability)

The total debt increased significantly from approximately $9.24 billion in 2017 to a peak of around $13.62 billion in 2019. Thereafter, it shows a declining trend, decreasing to about $10.98 billion by 2021 and stabilizing close to that level in 2022 at approximately $10.95 billion.

Total Stockholders’ Equity

Stockholders' equity exhibited a strong upward trend from $6.89 billion in 2017 to a high of $13.60 billion in 2021, nearly doubling within this timeframe. However, there was a decline in 2022, with equity dropping to about $11.73 billion, indicating some erosion of equity in the most recent period.

Debt to Equity Ratio (including operating lease liability)

The debt to equity ratio improved steadily from 1.34 in 2017 to 0.81 in 2021, reflecting a reduction in leverage relative to equity and potentially an improved balance sheet strength. However, this ratio increased slightly to 0.93 in 2022, suggesting a mild reversal in the deleveraging trend.

Overall, the data indicate that the company had been increasing its financial leverage up to 2019, followed by a period of deleveraging accompanied by growing equity until 2021. The small increase in leverage and drop in equity in 2022 may merit further monitoring to understand underlying drivers and potential impacts on financial stability.

Total Debt

The total debt exhibited a generally increasing trend from February 2017 to February 2019, rising from approximately 9.2 billion USD to around 13.6 billion USD. Subsequently, there was a decline in total debt from 2019 to 2021, reaching about 10.4 billion USD in February 2021. The debt level remained relatively stable between February 2021 and February 2022, with a slight decrease recorded.

Total Capital

Total capital followed a similar pattern, increasing substantially from approximately 16.1 billion USD in February 2017 to a peak of about 26.2 billion USD in February 2019. After that peak, total capital decreased over the following years, declining to about 22.1 billion USD by February 2022.

Debt to Capital Ratio

This ratio shows a consistent downward trend from 0.57 in February 2017 to 0.43 in February 2021, indicating a reduction in the proportion of debt relative to total capital. This decline suggests an improvement in capital structure balance or a reduction in leverage over this period. However, in the last recorded year, there was an increase to 0.47 in February 2022, which may reflect a slight rise in leverage or changes in the capital base.

Overall Insights

The data indicates that the company initially increased its debt and capital significantly until 2019, followed by a period of deleveraging and capital reduction. The debt to capital ratio trend supports the interpretation of improved leverage management until 2021, with a modest reversal in 2022. This pattern may reflect strategic financial management actions aimed at optimizing the balance between debt and equity financing during the analyzed timeframe.

The financial data for the analyzed periods reveal several noteworthy trends relating to total debt, total capital, and the debt-to-capital ratio.

Total Debt (including operating lease liability)

The total debt amount exhibits an overall increasing trend from February 28, 2017, to February 28, 2019, rising from approximately $9.2 billion to $13.6 billion. Following this peak, total debt decreases to about $12.7 billion by February 29, 2020, and continues to decline to around $10.9 billion by the last reported period of February 28, 2022. This suggests a deleveraging strategy or debt repayment initiative after 2019.

Total Capital (including operating lease liability)

Total capital also follows a rising trend initially, increasing from approximately $16.1 billion in early 2017 to a peak of $26.2 billion by February 28, 2019. Thereafter, total capital shows a declining trend, decreasing to roughly $22.7 billion by February 28, 2022. This reduction in total capital during the later periods could be indicative of reduced asset base, equity adjustments, or other capital structure changes.

Debt to Capital Ratio (including operating lease liability)

The debt-to-capital ratio declines consistently from 0.57 in 2017 to 0.45 by February 28, 2021, reflecting a shift toward a lower proportion of debt relative to total capital. However, in the final period reported (February 28, 2022), there is a slight uptick to 0.48, indicating a minor increase in leverage after a prolonged period of reduction. Overall, the ratio trend points to a more conservative capital structure over the majority of the periods with a modest reversal toward increased leverage in the most recent year.

In summary, the data illustrates an initial phase of increasing debt and capital through early 2019, followed by a phase of debt reduction accompanied by decreased total capital. The company’s leverage ratio declined notably during these years, suggesting improved solvency or a strategic shift to strengthen the balance sheet, with a slight rise in leverage in the final year possibly due to operational or strategic financing decisions.

Total Debt

The total debt exhibits an initial increasing trend from 9,238,100 thousand USD in early 2017, reaching a peak at 13,616,500 thousand USD by early 2019. Subsequently, it declines steadily over the following three years, reducing to approximately 10,416,500 thousand USD by early 2022.

Total Assets

Total assets increased significantly from 18,602,400 thousand USD in early 2017 to a peak of 29,231,500 thousand USD in early 2019. Thereafter, a decline is observed over the next three years, with total assets decreasing to 25,855,800 thousand USD by early 2022.

Debt to Assets Ratio

The debt to assets ratio shows a clear downward trend over the period analyzed. Starting at 0.50 in early 2017 and 2018, it gradually declined to 0.47 in early 2019, further decreasing to 0.45 in early 2020. A more pronounced reduction is seen in 2021 with the ratio falling to 0.39, before slightly increasing to 0.40 in early 2022, remaining well below the initial levels.

Overall, the data indicates that while the company experienced increases in both total debt and total assets until 2019, both metrics have shown a decreasing trend since then. The debt to assets ratio has improved consistently, reflecting a reduction in leverage relative to asset size, particularly between 2019 and 2021, suggesting a strengthening balance sheet position. The slight rise in the ratio in 2022 should be monitored but does not offset the overall deleveraging trend over the years.

Total Debt (Including Operating Lease Liability)

The total debt exhibits a general upward trend from 2017 to 2019, increasing from approximately 9.2 billion US dollars to about 13.6 billion US dollars. This indicates a significant rise in leverage during this period. However, from 2020 onwards, there is a consistent decrease in total debt levels, dropping to roughly 11.0 billion US dollars by 2022. This reduction may reflect deleveraging efforts or improved debt management strategies during the latter years.

Total Assets

Total assets follow a similar initial upward trajectory, rising substantially from about 18.6 billion US dollars in 2017 to a peak of approximately 29.2 billion US dollars in 2019. Following this peak, assets moderately decline over the subsequent years, with values around 25.9 billion US dollars by 2022. The decline in assets could suggest asset disposals, impairments, or a strategic shift affecting the asset base post-2019.

Debt to Assets Ratio (Including Operating Lease Liability)

The debt-to-assets ratio remains relatively stable at around 0.5 through 2017 and 2018, indicating that debt constituted about half of total assets during these years. A declining pattern emerges starting in 2019, with the ratio decreasing to approximately 0.41 by 2021, signaling reduced leverage relative to the company’s asset base. In 2022, there is a slight uptick to 0.42, though the ratio remains below earlier levels. This trend suggests improving financial stability and potentially enhanced creditworthiness due to a lower proportion of debt to assets over time.

Total assets

The total assets showed a consistent upward trend from 2017 through 2019, increasing from approximately 18.6 billion USD to over 29.2 billion USD. However, from 2019 onward, there was a notable decline, with assets decreasing to around 25.9 billion USD by 2022. This indicates a peak in asset accumulation in 2019 followed by a contraction in subsequent years.

Total CBI stockholders’ equity

Stockholders' equity experienced a significant increase between 2017 and 2019, rising from approximately 6.9 billion USD to 12.6 billion USD. After a slight dip in 2020, equity rebounded in 2021 to nearly 13.6 billion USD before decreasing again in 2022 to about 11.7 billion USD. Overall, the equity balance saw considerable growth followed by some volatility during the latter years.

Financial leverage

Financial leverage consistently decreased over the period from 2.7 in 2017 to a low of 1.99 in 2021, indicating a gradual reduction in reliance on debt relative to equity. In 2022, there was a modest increase to 2.2, suggesting a slight uptick in leverage but still below the levels observed in earlier years. This pattern reflects an overall trend toward a more conservative capital structure, with a brief reversal in the final year.

Earnings before interest and tax (EBIT)

Over the six-year period, EBIT displayed significant volatility. From 2017 to 2019, there was an upward trend, increasing from approximately 2.43 billion USD to 4.51 billion USD. However, in the fiscal year ending February 29, 2020, EBIT sharply declined to a negative figure of about -516.5 million USD, indicating a substantial operational loss during that year. Subsequently, EBIT rebounded in 2021 to roughly 2.93 billion USD but then decreased considerably again in 2022 to 667 million USD. This pattern suggests fluctuations in operational performance with a notable loss in 2020 and partial recovery thereafter, but without regaining the pre-2020 peak levels.

Interest expense

Interest expense maintained a relatively stable pattern throughout the period, fluctuating modestly between 332 million USD and 429 million USD. The highest interest expense occurred in 2020, coinciding with the operational loss observed in that year. Following this peak, interest expense declined somewhat in 2021 and 2022. The overall stability in interest expense suggests consistent debt servicing costs despite the variations in operational profitability.

Interest coverage ratio

The interest coverage ratio, indicating the ability to cover interest expenses from EBIT, mirrored the EBIT volatility. Between 2017 and 2019, the ratio improved steadily from 7.28 to 12.29, reflecting strong earnings relative to interest obligations. In 2020, the ratio fell dramatically to -1.2, consistent with the negative EBIT figure and indicating a failure to cover interest expenses from operating earnings. The ratio recovered to 7.59 in 2021 but dropped again to 1.87 in 2022, showing a diminished ability to comfortably meet interest obligations despite positive EBIT. This suggests increased financial risk in the most recent year observed.

Earnings Before Fixed Charges and Tax

The earnings before fixed charges and tax exhibited a generally increasing trend from 2017 to 2019, rising from 2,485,900 thousand US dollars in 2017 to 4,575,600 thousand US dollars in 2019. However, in 2020 there was a significant downturn, with earnings dropping sharply to a negative value of -417,600 thousand US dollars. This was followed by a recovery in 2021 to 3,022,000 thousand US dollars, although the earnings decreased again in 2022 to 756,300 thousand US dollars, indicating volatility and challenges faced during this period.

Fixed Charges

Fixed charges remained relatively stable over the years, fluctuating within a range of approximately 391,100 to 527,600 thousand US dollars. The highest fixed charges were recorded in 2020 at 527,600 thousand US dollars, which coincides with the year of negative earnings before fixed charges and tax. Thereafter, fixed charges decreased steadily to 445,900 thousand US dollars in 2022.

Fixed Charge Coverage

The fixed charge coverage ratio showed strong coverage from 2017 to 2019, increasing from 6.33 to a peak of 10.63 in 2019. This suggests robust ability to cover fixed charges during these years. In 2020, the ratio became negative at -0.79, reflecting the negative earnings before fixed charges and tax and indicating inability to cover fixed charges from operating earnings. The ratio partially recovered to 6.31 in 2021, demonstrating improved earnings relative to fixed charges, but declined again to 1.7 in 2022, which signals a reduced margin of safety in meeting fixed financial obligations.

Summary of Trends and Insights

Overall, the data reveals a strong financial position prior to 2020, with increasing earnings capacity and solid fixed charge coverage. The year 2020 marks a significant disruption, with negative earnings and coverage ratio, likely reflecting extraordinary challenges in that period. While there was recovery in 2021, the decline in 2022 figures indicates ongoing financial pressures or increased costs relative to earnings. The stability in fixed charges suggests consistent fixed financial obligations even as earnings fluctuated. This volatility in earnings and coverage highlights a period of financial stress, with a need for attention to improve profitability and maintain adequate coverage of fixed charges going forward.