Categories Analysis, Earnings, Retail

Earnings preview: Constellation Brands to outperform in Q3

Constellation Brands Inc. (STZ) is scheduled to report earnings results for the third quarter on Wednesday before the bell. Investors expect the wine and beer maker to outperform in the quarter as a change in climate could aid in sales growth of its both Beer and Wine and Spirits divisions. Marketing spending is likely to reduce the growth rate.

The New York-based brewer has depended on the Beer and Wine and Spirits divisions in the previous quarters to show considerable growths in the top line. The company’s results will be benefited by strong portfolio performance and market share gains from the beer division as well as strong shipment volume growth in the wine and spirits division.

The company’s beer business could be driven by accelerating Corona brand family dollar trends and Modelo Especial’s top position in the market. The results will also be aided by the new Corona Premier and Corona Familiar beer product launches.

In the wine and spirits division, the results will be benefited by Meiomi, Kim Crawford, Simi, and Prisoner brands. The company has a strong wine and spirits innovation pipeline for the holiday selling season that includes brands like Meiomi Sparkling, The Snitch, Cooper & Thief Rye Barrel Aged Cabernet, as well as Black Box Spirits.

Analysts, on average, expect the company to post earnings of $2.06 per share on revenue of $1.91 billion for the third quarter. In comparison, during the previous year quarter, the company reported a profit of $2.00 per share on revenue of $1.8 billion. Majority of the analysts recommended a “strong buy” or “buy” rating while expecting the stock to reach $238.87 in the next 52 weeks.

Investors are turning cautious as the company’s bottom line growth is dragged down below 20% due to rising marketing costs. It is expected that the year-over-year profitability growth rate will be in the single-digits for the third quarter. Also, traders will be looking forward to the slowdown in the expenses growth for the company to reach the higher growth rate in earnings.

Constellation Brands brews earnings beat in Q2

For the second quarter, Constellation Brands posted a 136% jump in earnings helped by higher sales from its Beer and Wine and Spirits divisions. Also, the company intended additional $4 billion investment in Canopy Growth Corp as the transaction provides it with a strong foothold in the emerging global cannabis market. This has increased Constellation’s stake to 38% in the medical marijuana company. The market could be one of the most significant growth opportunities of the next decade.

Looking ahead into the full year 2019, the company has expected earnings in the range of $14.10 to $14.25 per share and comparable earnings in the range of $9.60 to $9.75 per share. The beer business predicted net sales and operating income growth of 9% to 11% while the wine and spirits business projected net sales and operating income growth of 2% to 4% for 2019.

Shares of Constellation Brands closed Monday’s regular session up 2.10% at $170.12 on the NYSE. The stock has fallen over 22% in the past year and over 23% in the past three months.


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