A Leaner Constellation Brands Looks Forward

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Constellation Brands Inc. (NYSE: STZ) released its fiscal fourth-quarter financial results before the markets opened on Thursday. The beer company said that it had $1.84 in earnings per share (EPS) and $1.97 billion in revenue, which compares with consensus estimates of EPS of $1.72 on $1.73 billion in revenue, as well as the $1.90 per share and $1.77 billion posted in the same period of last year.

Late Wednesday the firm announced that it has signed an agreement with E. & J. Gallo Winery to divest about 30 brands from its wine and spirits portfolio principally priced at $11 retail and below, along with related facilities located in California, New York and Washington, for $1.7 billion.

The transaction also is subject to certain closing conditions, including regulatory approval, and is expected to close at the end of the company’s first quarter of fiscal 2020.

Looking ahead to the 2020 fiscal year, the company said that it sees comparable earnings of $8.50 to $8.80 per share, with operating income from its beer division rising between 7% and 9%, while wine and spirits are expected to see a net decline in sales of 25% to 30%. Consensus estimates call for $9.44 in EPS and $8.53 billion in revenue for the full year.

CEO Bill Newlands commented:

We’ve positioned our wine and spirits business for success with our announced plans to sell a portion of the business, which enables us to continue to strategically focus on our 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.

Shares of Constellation Brands closed Wednesday at $179.69 and were up fractionally at $181.04 just after Thursday’s opening bell. The stock has a 52-week range of $150.37 to $236.62 and a consensus price target of $210.61.

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