Are Constellation Brands Earnings Good Enough to Offset Coronavirus Uncertainty?

Companies and Brands

Published: April 3, 2020 9:54 am

Constellation Brands Inc. (NYSE: STZ) reported its fiscal fourth-quarter financial results before the markets opened on Friday. Constellation Brands makes and sells Corona beer, but this doesn’t make the company immune to the virus. In fact, coronavirus concerns have raised some questions about its future. For now, the company posted solid fourth-quarter results.

The Corona beer maker posted $2.04 in earnings per share (EPS) and $1.90 billion in revenue, while consensus estimates had called for $1.65 in EPS and $1.84 billion in revenue. The same period of last year reportedly had $1.84 in EPS and $1.8 billion in revenue.

During the latest quarter, Constellation’s Beer Business posted import beer depletion growth of 11.4% and overall depletion growth of 10.8%, driven by the Modelo and Corona brand families. The Modelo brand family grew depletions more than 18% while the Corona brand family grew nearly 5%.

For the Wine and Spirits segment, depletion growth accelerated to more than 4% for the Power Brand portfolio, led by double-digit growth for Kim Crawford, Meiomi and the Prisoner brand family. During the quarter, Wine Power brands outpaced the total U.S. wine market, while higher-end Wine Power brands outpaced the total higher-end U.S. wine market.

The company noted that guidance for fiscal 2021 would be unavailable due to COVID-19 uncertainties. Without the COVID-19 influence, the company had previously expected to see net sales growth in beer around 7% to 8% with an operating margin of 39.5% to 40.0%. Analysts were calling for $8.59 in EPS and $7.63 billion in revenue for the fiscal year.

Bill Newlands, president and CEO, commented:

Fiscal 20 represented another excellent year of strong results marked by milestones which include the achievement of record cash flow results and double-digit operating income growth for our iconic beer business. In addition, our Wine & Spirits Power Brands and new product introductions fueled growth as our premiumization strategy for this business continues to gain momentum.

Constellation Brands stock traded up about 1% to $132.85 Friday morning, in a 52-week range of $104.28 to $214.48. The consensus price target is $190.94.

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