Constellation (STZ) beats Q4 revenue and earnings estimates

Constellation Brands (NYSE: STZ) reported better-than-expected revenue and earnings for the fourth quarter of 2020, allowing shares to gain over 4% in premarket hours on Friday.

Net sales grew 6% year-over-year to $1.90 billion, beating estimates of $1.84 billion.

Reported net income fell to $398.4 million, or $2.04 per share, from $1.23 billion, or $6.37 per share, last year. Last year’s results included a gain of $1.18 billion from unconsolidated investments. On an adjusted basis, EPS rose 12% to $2.06, topping forecasts of $1.65.  

Net sales in the Beer division rose 8.9% to $1.18 billion in the fourth quarter. The business saw import beer depletion growth of 11.4% and overall depletion growth of 10.8% driven by the Modelo and Corona Brand Families.

In the Wine and Spirits segment, net sales gained 1.2% to $715.4 million. Depletion growth came to over 4% for the Power Brand portfolio, helped by double-digit growth in Kim Crawford, Meiomi and The Prisoner Brand Family.

CFO Garth Hankinson said, “We have significant capacity under our $2 billion revolving credit facility and we plan to carefully manage our debt position over the next 24 months. In addition, we are expecting approx. $850 million in cash upon the close of the Gallo transaction and we remain focused on prudently navigating the challenging operating environment presented by COVID-19.”

Constellation is not providing FY2021 EPS guidance at this time due to potential impacts from the coronavirus outbreak. However, its pre-COVID-19 expectations for the period reflect a net sales growth of 7-8% in Beer including the impact of the Ballast Point divestiture. Net sales and operating income in the Wine and Spirits division are expected to decline approx. 30-35% from the previous year.

Constellation declared a quarterly cash dividend of $0.75 per share of Class A common stock and $0.68 per share of Class B common stock, payable on May 19, 2020, to stockholders of record as of May 5, 2020.

Constellation’s investment in Canopy Growth (NYSE: CGC) yielded a loss of $31.7 million in the fourth quarter. Canopy is estimated to record a pretax loss of approx. CAD700 million to CAD800 million for its fourth quarter of 2020 and Constellation’s share of this loss will be CAD245 million to CAD280 million which it will record in Q1 2021.