Constellation Brands Inc. (NYSE:STZ)

Operating Activities Cash Flow

The net cash provided by operating activities showed a consistent upward trend from 2017 to 2021. Starting at approximately $1.7 billion in 2017, it increased annually, reaching a peak of about $2.8 billion in 2021. However, in 2022, a slight decrease occurred, with operating cash flow falling to approximately $2.7 billion. This suggests generally improving operational cash generation capacity over the period, despite a minor decline in the most recent year.

Free Cash Flow to the Firm (FCFF)

Free cash flow to the firm also exhibited growth from 2017 through 2021, beginning at roughly $1.0 billion and increasing to around $2.3 billion by 2021. Unlike operating cash flow, FCFF experienced a more pronounced decline in 2022, dropping to an estimated $1.68 billion. This indicates that while the overall cash generation from operations was relatively stable, the free cash available after investment activities diminished somewhat in the latest year.

Overall Trends and Insights

Both operating cash flow and FCFF demonstrated steady growth over the five-year span leading to 2021, reflecting improving operational efficiency and cash profitability. The decline in 2022 for both metrics, particularly more substantial in FCFF, could be indicative of increased capital expenditures, changes in working capital, or other investing activities impacting free cash flow. Despite this decline, cash flows remain significantly higher than at the beginning of the period, signifying robust cash generation capability overall.

Effective Income Tax Rate (EITR)

The effective income tax rate exhibits significant variability throughout the period analyzed. Starting at 26.5% in 2017, it dropped sharply to 0.5% in 2018, indicating a substantial reduction in tax expenses or tax credits applied during that year. It then increased to 16.5% in 2019, followed by a gradual rise to 21% in 2020 and a slight decrease to 20.1% in 2021. Notably, there is a dramatic spike to 99.7% in 2022, which may suggest an extraordinary tax event, adjustment, or accounting anomaly during that fiscal year.

Interest, Net of Interest Capitalized, Net of Tax

The net interest expense shows a generally upward trend from 2017 through 2021. It begins at approximately $220.8 million in 2017, increases significantly to around $320.6 million in 2018, slightly declines to $271.2 million in 2019, and then rises again with a peak of approximately $354.6 million in 2020. A slight decrease to $334.4 million is noted in 2021. However, in 2022, this figure plummets drastically to about $1.1 million, representing an anomalous reduction that likely reflects a change in financing structure, interest rates, or accounting methods.

Capitalized Interest Costs, Net of Tax

Capitalized interest costs, which were not reported in 2017, appear starting in 2018 at approximately $17.3 million. These expenses progressively increased to about $19.3 million in 2019 and further to roughly $29.4 million in 2020. In 2021, capitalized interest costs decline to approximately $25.2 million and then fall steeply to $76 thousand in 2022. This pattern suggests an initial growth in capital expenditure activities financed through borrowing, followed by decreased capitalization or reduced qualifying projects in the latest year.

The analysis of the financial data over the six-year period reveals several notable trends and shifts in key financial metrics.

Enterprise Value (EV)

The enterprise value demonstrates significant fluctuations. Starting at approximately 42.38 billion US dollars in early 2017, it increases markedly to over 53.8 billion in 2018. It remains relatively stable in 2019 but then declines sharply to about 41.95 billion in 2020. Subsequently, the enterprise value rebounds strongly, reaching 56.55 billion in 2021 and further rising to approximately 58.38 billion by early 2022. This pattern suggests periods of both contraction and expansion, with the most notable dip occurring in 2020, likely influenced by external economic factors.

Free Cash Flow to the Firm (FCFF)

Free cash flow to the firm presents a generally upward trajectory from 2017 to 2021. The value increases steadily from just over 1 billion in 2017 to a peak of about 2.3 billion in 2021. However, there is a decline in the final year, falling to approximately 1.68 billion in 2022. Despite the decrease in 2022, the overall trend over the period indicates growing cash generation capacity, albeit with some volatility in the most recent year.

EV to FCFF Ratio

The ratio of enterprise value to free cash flow shows a downward trend from 41.98 in 2017 to a low of 19 in 2020, indicating improved valuation relative to cash flow during this period. The decline suggests that the enterprise value became more efficient compared to the cash flow generated up to 2020. After this trough, the ratio rises again to 24.57 in 2021 and further to 34.75 in 2022. This increase may reflect the rise in enterprise value outpacing the free cash flow growth in the latter years, particularly in 2022.

In summary, the data indicates a volatile enterprise value with a significant fall and recovery phase, a mostly increasing free cash flow with a recent decline, and a valuation metric that generally improved until 2020 before reversing direction. These dynamics highlight the interplay between market valuation and operational cash generation over the analyzed timeframe.