Better-than-expected fourth-quarter results
Constellation Brands (STZ) stock is up 4.0% as of 10:52 AM EDT today after reporting its better-than-expected sales and earnings results for the fourth quarter of fiscal 2019, which ended on February 28.
Constellation Brands’ sales grew 2.0% year-over-year to ~$1.80 billion in the quarter and exceeded analysts’ expectation of $1.74 billion. The company’s top line growth was driven by a 9.3% rise in its Beer segment’s sales to $1.1 billion driven by strength in the Modelo and Corona brand families.
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The company’s fourth-quarter sales growth was adversely affected by a 7.6% fall in its Wine and Spirits segment’s sales to $707.1 million.
Constellation Brands’ fourth-quarter adjusted EPS fell 2.6% to $1.84 but crushed analysts’ expectation of $1.71. This decline was caused by a lower operating income from the Wine and Spirits segment.
Repositioning Wine and Spirits segment
After the markets closed on April 3, Constellation Brands announced that it would divest 30 wine and spirits brands and the related facilities to E. & J. Gallo Winery for $1.7 billion. The brands that will be divested are primarily priced at $11 and below, a category in which Constellation Brands has been facing continued weakness. The company expects to complete this divestiture by the end of the first quarter of fiscal 2020.
Constellation Brands’ decision to divest the value end of its Wine and Spirits segment is in line with its strategy of focusing on high-end premium beer, wine, and spirits brands.
Apart from being focused on premium alcoholic beverages, Constellation Brands is also optimistic about capitalizing on the growth opportunities in the cannabis market through its significant investment in Canopy Growth (CGC).