Abhoy Sarkar's Avatar
published in Blogs
Apr 04, 2019

Constellation (STZ, $187.09) beats fiscal Q4 earnings estimates, says cheers to beer

Constellation Brands fiscal fourth quarter earnings surpassed analysts’ expectations, largely in part due to the beverage company’s beer sales. The company is also pulling out from its low-end wine brands, apparently to focus on better selling products.

Comparable earnings for the three months ending February came in at $1.84 per share, down -3.15% from the year-ago quarter, but higher than the Street estimate of $1.72 per share.

The company’s sales of $1.797 billion also beat analysts' estimates of $1.73 billion. Sales were also +2% higher compared to the year-ago period.

As it is, consumers are increasingly adopting healthier lifestyles and food habits. People who still consume alcohol are apparently preferring higher-quality wine or premium beer.  It is probably this shift in consumer choices that has led Constellation to re-allocate its business more towards beer and other high-end beverages.

On Wednesday, Constellation announced plans to sell off about 30 brands from its wine and spirits portfolio to E. & J. Gallo Winery for $1.7 billion. The company will also be launching its first ever non-beer beverage, named Corona Refresca, during its first quarter.

For the latest reported quarter, Constellation’s beer sales climbed +9.3% year-over-year to $1.09 billion. According to the company, its beer business was the top U.S. market share gainer during the holiday season. It mentioned its brands Modelo Especial, Corona Premier and Corona Familiar as major contributors to its solid beer sales.

Sales from its wine and spirits segment, on the other hand, plunged -7.6% year-over-year to $707.1 million. 

For fiscal full-year 2020, Constellation forecasts that its comparable earnings would  range between $8.50 and $8.80 per share, excluding Canopy Growth equity earnings (Constellation bought a 38% stake in the marijuana company last year, as a sign of its plans to expand footprints in the cannabis space). The company hopes to have a 7%-9% growth in operating income from its beer division, while anticipating wine and spirits to be hit by -30% to -35% decline in operating incomes.

 

 

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