Constellation Brands’ Massive Bet On Marijuana Weighs On Profit

Constellation Brands

Constellation Brands Inc (NYSE: STZ)

Constellation Brands Inc. shares were selling off in early trading Wednesday as Wall Street reacted to the beer maker’s lower-than-anticipated guidance for its 2019 fiscal year. The company reported a huge drop in fiscal third-quarter profit because of the $4 billion it invested in Canadian cannabis grower Canopy Growth Corp in 2018. Constellation said it wrote down the fair value of its investment in Canopy Growth by $164 million.

The New York-based alcohol giant also pruned its profit outlook for the full year, warning that its wine and spirits segment will be weaker next quarter. Constellation, which is best known for brands such as Robert Mondavi and Corona beer, saw its shares fall to their lowest since 2013. As of 11:55 a.m. ET, the stock was changing hands at $156.01 after losing $16.33, or 9.48%.

STZ Earnings & Outlook

The company reported third-quarter net income of $303.1 million, or $1.56 per share, down from $492.8 million, or $2.45 per share, in the earlier-year period. Excluding on-time items, earnings came to $2.37 per share. Total revenue was $1.97 billion, up 9% from the same period a year ago.

Analysts were expecting adjusted earnings of $2.06 per share on sales of $1.91 billion, based on figures compiled by Refinitiv. Sales for its beer segment were $1.21 billion, up 16% from $1.04 billion the third quarter of the previous year. Wine and spirits sales totaled to $762.8 million, up 0.4% from the prior-year quarter and head of $747.8 million expectations.

Looking ahead, Constellation Brands now views full-year adjusted earnings of $9.20 to $9.30 per share, down from its earlier forecast of $9.60 to $9.75 per share. Analysts expects the company to post adjusted earnings of $9.43 per share for the year.

Constellation Brands CEO Comments

“The results delivered by our beer business mark the highlight of our third quarter performance. The Modelo and Corona brand families continue to be on fire, fueled by strong velocities, excellent distribution gains and highly incremental innovation. Our leadership in the high-end U.S. beer industry positioned us to be the most significant growth contributor at retail during the quarter,” commented Rob Sands, Chief Executive Officer of Constellation Brands.

Constellation Brands, Inc. Profile

Constellation Brands, Inc. engages in the production, marketing, and distribution of beer, wine, and spirits. It operates through the following segments: Beer, Wine and Spirits, and Corporate Operations and Other. The Beer segment includes imported and craft beer brands. The Wine and Spirits segment sells wine brands across all categories-table wine, sparkling wine and dessert wine-and across all price points.

The Corporate Operations and Other segment comprises of consist of costs of executive management, corporate development, corporate finance, human resources, internal audit, investor relations, legal, public relations and information technology. The company was founded by Marvin Sands in 1945 and is headquartered in Victor, NY. – CNN Money