What to expect when Constellation Brands reports Q3 earnings?

Constellation Brands (NYSE: STZ) is scheduled to report third quarter 2020 earnings on Wednesday, January 8, before the market opens. Analysts expect the company to report earnings of $1.85 per share on revenue of $1.95 billion.

The strength in the beer business is expected to continue, led by the Modelo and Corona brands. The segment saw higher shipment volumes in the second quarter and the momentum is likely to continue this quarter as well.

Last month, Constellation announced that Kings & Convicts Brewing Co. agreed to acquire the Ballast Point brand for undisclosed terms. The company also revised its agreement with E. & J. Gallo Winery to exclude certain brands from the transaction leading to an adjusted transaction price of approx. $1.1 billion, including an earnout of $250 million. The revisions were undertaken to address competitive concerns by the FTC. Both deals are expected to close by the end of fiscal 2020.

Constellation also struck a deal with E. & J. Gallo to divest its Nobilo Wine brand and related assets for $130 million. The deal is expected to close in the first half of 2021. Updates on these transactions will be worth watching.

Also read: Constellation Brands Q2 2020 Earnings Call Transcript

In the second quarter of 2020, Constellation beat earnings estimates while revenues came in line with expectations. Net sales increased 2% to $2.34 billion while adjusted EPS fell 5% to $2.72.

Last quarter, the company had forecast GAAP EPS to be $0.55-0.75, and adjusted EPS to be $9.00-9.20. In light of the new and revised transactions, Constellation will update its guidance once again during the third quarter announcement.

Shares of Constellation Brands gained over 17% in the past one year. The majority of analysts have rated the stock as Buy and it has an average price target of $223.29.

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