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Will Constellation Brands Stock Rise on Q1 Results?

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YTD movement

Constellation Brands (STZ) plans to announce its results for the first quarter of fiscal 2020 on June 28. The first quarter ended on May 31. Constellation Brands stock has risen 14.4% since the start of this year. The stock currently lags the S&P 500, which had risen 16.5% on a YTD basis as of June 25. Constellation Brands stock also lagged the 34.3% and 17.1% YTD rise in Anheuser-Busch InBev (BUD) and Brown-Forman (BF.B). Molson Coors (TAP) stock was down 1.4% on a YTD basis as of June 25.

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Constellation Brands’ sales and earnings came in ahead of analysts’ expectations in the fourth quarter of fiscal 2019, which ended on February 28. However, Constellation Brands’ adjusted EPS declined 2.6% in the fourth quarter due to the dismal performance of its wine and spirits business. In April 2019, Constellation Brands entered an agreement with E. & J. Gallo Winery to sell a part of its wine and spirits portfolio for $1.7 billion. The company’s decision involved divestiture of about 30 wine and spirits brands mainly selling at a retail price of $11 or below.

Profitability expectations

Analysts expect Constellation Brands’ adjusted EPS to decline 6.8% to $2.05 in the first quarter of fiscal 2020. Analysts’ EPS guidance is based on estimated sales growth of about 0.9%. The expected decline in the first quarter earnings reflects lower operating income from the wine and spirits business.

Based on the guidance issued in April, Constellation Brands expects its Beer segment’s operating income growth in the mid-single digits in fiscal 2020’s first quarter. The company expects the operating income of its Wine and Spirits segment to decline by 20% in the first quarter.

Constellation Brands expects its adjusted EPS in the range of $8.50 to $8.80 (excluding the impact of its investment in Canopy Growth) in fiscal 2020 compared to $9.28 in fiscal 2019. Analysts currently expect Constellation Brands’ adjusted EPS to decline 7.8% to $8.56 in full-year fiscal 2020, which ends on February 28, 2020.

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