Constellation Brands announces $500 million senior notes offering due 2035

Constellation Brands, Inc. (NYSE:STZ), currently trading near its 52-week low with a market capitalization of $24.4 billion, announced Wednesday that it has entered into an underwriting agreement for the sale of $500 million aggregate principal amount of 4.950% Senior Notes due 2035. According to InvestingPro analysis, the company appears to be undervalued based on its Fair Value calculations. The agreement was made with BofA Securities, Inc., BBVA Securities Inc., J.P. Morgan Securities LLC, and Wells Fargo Securities, LLC, who are acting as representatives of the underwriters.

The public offering price for the notes is 99.716% of the principal amount. According to the company, the purchase of the notes by the underwriters is scheduled to close Friday, subject to customary closing conditions.

Constellation Brands stated that it intends to use the net proceeds from the offering for general corporate purposes. This includes the planned redemption of all its outstanding 4.400% Senior Notes due 2025, which have an aggregate principal amount of $500 million. The company maintains a debt-to-equity ratio of 1.41 and generates substantial free cash flow of $1.85 billion, according to recent InvestingPro data.

The company has filed a prospectus dated November 10, 2022, and a prospectus supplement dated Wednesday for the notes as part of its registration statement on Form S-3 with the Securities and Exchange Commission. In connection with the offering, a legal opinion regarding the validity of the notes is being filed as an exhibit to the current report.

This information is based on a press release statement and a filing with the Securities and Exchange Commission. For a comprehensive analysis of Constellation Brands’ financial health, debt management, and growth prospects, access the detailed Pro Research Report available exclusively on InvestingPro, covering over 1,400 top US stocks.

In other recent news, Constellation Brands reported second-quarter earnings per share of $3.63, surpassing the consensus estimate of $3.46. This earnings beat was primarily attributed to stronger-than-expected Beer profits, which contributed approximately $0.14 to the EPS outperformance. Despite the positive earnings, TD Cowen lowered its price target for Constellation Brands to $144 while maintaining a Hold rating, noting a 2.7% decline in depletions, which was better than their projected 4.5% drop. In contrast, Bernstein reiterated an Outperform rating with a price target of $195, focusing on potential scenarios related to immigration policy concerns affecting Hispanic consumer behavior. RBC Capital also maintained an Outperform rating with a $200 price target, highlighting notable strength in beer margins despite volume pressures. BMO Capital echoed this sentiment, reiterating an Outperform rating and a $190 price target, emphasizing the positive impact of cost savings on the company’s earnings. These developments come amid broader industry discussions, such as Piper Sandler’s analysis of the food and beverage sector, which sees modest impacts from GLP-1 weight loss drugs and highlights inflation as a more significant factor affecting consumer behavior.

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