Constellation Brands Inc. reported a substantial decline in profits in the latest quarter, and lowered its earnings outlook for fiscal 2019. Its shares dropped more than -10% Wednesday, following the announcement.
The beverage maker said that net income for its fiscal quarter ending November 30, decreased around -38% to $303.1 million (or $1.56 a share) - from $492.8 million (or $2.45 a share) a year earlier. A spike in freight and marketing costs as well as interest costs related to its investment in Canopy Growth were cited as major factors in squeezing earnings. In November 2017, Constellation Brands made an initial investment of $191.3 million in cannabis company Canopy Growth, and has exercised several options to buy additional shares – thereby adding to transaction and interest costs. Constellation’s operating margin in the period decreased 60 basis points to 37.3%.
The company made a downward revision to its fiscal 2019 profit outlook to a range of $9.20 to $9.30 a share, compared to prior forecast of $9.60 to $9.75 a share.
However, sales were a bright spot. Net sales rose +9.5% to $1.97 billion in the quarter, beating analysts' estimates of $1.91 billion. Its beer sales surged +16% to $1.21 billion.