Constellation Brands (NYSE:STZ) just finished a strong year on a positive note. The alcoholic beverage giant this week announced solid growth in its beer portfolio despite weak demand at bars and restaurants. The wine and spirits division continued to struggle on both the sales and profit fronts, but management had a surprisingly bright outlook for that segment, too.

Let's dive right in.

Friends drink beer outside.

Image source: Getty Images.

Growth is good

Beer depletions, a measure of consumer sales, landed at 6.4%. That was a sharp slowdown from the prior quarter's 12.3% spike, but management had predicted that growth would decelerate thanks to the timing of its inventory shipments. Net sales gains were up 8% for the full year, or right where CEO Bill Newlands and his team had projected back in January.

Standout performers were once again Constellation Brands' high-end imported brands like Modelo and Corona. A 9% depletion spike for Modelo, in fact, made it the third-highest-selling beer in the U.S. market in 2020. Corona hard seltzer, Constellation's push into the booming alcoholic seltzer niche, notched a 20% depletion increase for the year.

Profitability ticked up as beer prices rose and marketing costs were restrained. "We produced excellent results while managing the challenges of the pandemic," Newlands said in a press release.

Stumbling blocks

It wasn't all good news in this report. Constellation Brands' wine and spirits division showed another slight sales decrease along with falling profitability. Revenue is being pressured by brands in the low price segment, most of which are being divested. The company also saw rising costs due to California wildfire disruptions. Yet there are hints of a rebound on the way, with the core portfolio that includes the Kim Crawford and Meiomi brands rising 5%.

Constellation Brands also took some big charges related to some of its Mexican breweries and to the drop in Canopy Growth's stock price. These reduced reported earnings, but management is planning to continue investing heavily in both its capacity expansion project and the recreational marijuana space.

The bright outlook

Constellation's fiscal 2022 outlook calls for a 12th consecutive year of volume growth for the beer business, with the upcoming launch of a lemonade version of Corona hard seltzer helping push sales up between 7% and 9%, or right on pace with 2021's expansion. Margins should take a small step backward after rising for several years, management warned.

The wine division will weigh on results again due to lingering impacts from its portfolio reboot. But Constellation is predicting organic sales growth this year and steady profitability now that its restructuring project is essentially complete.

The clearest positive sign for investors is that the company has a bright outlook for cash flow. Operating cash should land at between $2.4 billion and $2.6 billion in fiscal 2022 compared to last year's record $2.8 billion.

That means Newlands and his team will have loads of resources to direct toward high-return projects like the beer brewing expansion, hard seltzer brands, and Canopy Growth. Thus, while operating results might be bumpy over the next few quarters, the investor return outlook is positive for this growth stock.

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