Must-know update: Soros Fund Management's positions in 4Q 2013

Part 8
Must-know update: Soros Fund Management's positions in 4Q 2013 (Part 8 of 8)

Why George Soros’ fund sold its stake in Constellation Brands

Soros and Constellation Brands

Soros Fund Management exited a 0.83% position in Constellation Brands (STZ) last quarter.

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Constellation Brands, which owns wine brands such as Robert Mondavi and Ravenswood, saw earnings jump 93% in 3Q 2014, driven by Crown Imports. The results beat analyst estimates, as the company earned $211 million, or $1.07 per share. Sales increased to $1.59 billion before deducting excise taxes. The significant increase for third quarter consolidated net sales was driven by $662 million of incremental net sales related to the consolidation of Crown. For the quarter, net sales for the beer segment increased 21%, primarily due to volume growth driven by strong consumer demand, the return of distributor inventories to more normal levels, and a favorable comparison versus last year’s third quarter.

Constellation closed the Grupo Modelo U.S. beer business acquisition in June 2013. The business was acquired from Anheuser-Busch InBev for about $4.75 billion and included the full ownership of Crown Imports. Constellation acquired the U.S. distribution rights for the Corona and Modelo Especial beers via the deal.

However, the wine segment continued to show weakness, as wine and spirits net sales on an organic constant currency basis increased 3%. The company said wine volume growth was partially offset by higher promotional spending and lower bulk spirits sales. CEO Robert Sands said, “As expected, throughout the quarter we began to see the acceleration of our U.S. wine depletion trends during the key holiday selling season.” But Sands noted that “this year’s financial performance has been tracking below our expectations and we now expect operating profit for the wine and spirits business to be flat to down slightly for the year.”

The company raised its full-year earnings forecast to between $3.10 and $3.20 per share from $2.80 to $3.10 per share. Some analysts downgraded the stock on concerns over the company’s wine and spirit segment’s future.

To learn more about George Soros’ Soros Fund Management, see the Market Realist series Soros Management opens positions in dry bulk shippers, Q3 2013.

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