What happened
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Shares of Constellation Brands (NYSE: STZ) climbed 20.7% in April, according to data from S&P Global Market Intelligence, after the alcoholic beverage giant announced strong fiscal fourth-quarter 2019 results. ” data-reactid=”12″>Shares of Constellation Brands (NYSE: STZ) climbed 20.7% in April, according to data from S&P Global Market Intelligence, after the alcoholic beverage giant announced strong fiscal fourth-quarter 2019 results.
Constellation Brands climbed 6.5% on April 4 alone, on the first trading day after its quarterly update hit the wires. The company’s quarterly revenue climbed 2% year over year to $1.797 billion, driven by strength from the company’s Modelo and Corona brands. On the bottom line, net income skyrocketed 36% to $1.24 billion, and — thanks to share repurchases over the past year — rose 40% on a per-share basis to $6.37.
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So what
To be fair, investors should note that shipment volumes during the quarter beat expectations largely due to timing, and poor weather on the West Coast led to higher-than-planned distributor inventory near the end of the quarter. The shipment timing benefit should reverse itself over the course of the coming year.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Earnings would have also declined around 2.6% to $1.84 per share had it not been for gains recognized on the company's equity stake in cannabis leader Canopy Growth. But even then, Constellation Brands’ results arrived well above analysts’ consensus estimates for earnings of $1.72 per share on revenue closer to $1.73 billion.” data-reactid=”28″>Earnings would have also declined around 2.6% to $1.84 per share had it not been for gains recognized on the company’s equity stake in cannabis leader Canopy Growth. But even then, Constellation Brands’ results arrived well above analysts’ consensus estimates for earnings of $1.72 per share on revenue closer to $1.73 billion.
Now what
Constellation Brands also signed an agreement during the quarter to sell parts of its wine and spirits businesses to E. & J. Gallo Winery for $1.7 billion.
According to Constellation CEO Bill Newlands, the move will allow the company to hone its focus on its “powerhouse, high-margin, high-growth brands.”
“During fiscal 2019, our beer business delivered industry leading double-digit sales and operating income growth led by our powerful, high-end brands and successful consumer-led innovation,” Newlands added. “Overall, we’re confident in our ability to drive top line growth of mid-to-high single digits over the next three to five years across our entire business.”
In the meantime — and keeping in mind the aforementioned wine and spirits divestment — Constellation Brands expects fiscal 2020 earnings per share (excluding Canopy Growth) of $8.50 to $8.80, down from $9.34 per share in fiscal 2019. That range assumes growth of 7% to 9% in both sales and operating income from the beer business and a 25% to 30% revenue decline with a 30% to 35% drop in operating income from the wine and spirits segment.
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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.” data-reactid=”42″>Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
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