Constellation Brands is up on Good Earnings


Constellation Brands announced today it’s earnings and revenue figures which largely surpassed Wall Street expectations. A major alcohol producer that also has a significant investment in the cannabis sector, Constellation has been buoyed by strong investor sentiment surrounding the marijuana market. At the same time, the company will be moving away from poorly selling wine and spirits as beer sales continued to drive the company’s earnings.

Overall, U.S. consumers have been moving away from cheap alcohol according to IWSR data, which suggests that a growing cadre of health-conscious consumers are opting out of liquor altogether. Those who still drink also are moving away from cheap drinks, favoring higher value wines and premium beer.

This move was the main reason why Constellation announced on Wednesday that they were selling around 30 brands from its wine and spirits portfolio. The transaction would net the company around $1.7 billion. Previously, Constellation had hoped to make as much as $3 billion on selling its entire wine portfolio but has chosen to accept the smaller deal instead. These new proceeds will be focused on paying off the company’s debt.

The company’s beer sales have increased 9.3 percent in total, up from $997 million to $1.09 billion over the course of the year. On the other hand, revenue from its wine and spirits brands dropped by 7.6 percent, down from $765 million to $707.1 million.

While these figures regarding Constellations’ alcohol revenues in and of themselves might not be enough to justify this spike in stock price, analysts are hopeful that despite the uncertainty seen in the marijuana industry, Constellations’ large investment into that sector could pay significant dividends in the years to come. Back in 2018, Constellation Brands bought a 38 percent stake in one of the largest cannabis companies in the world, Canopy Growth Corp (TSX: WEED)(NYSE: CGC), making the alcohol giant one of the biggest players in the CBD-infused beverage market. Many industry experts regarding legalized cannabis as a big threat to alcohol companies in the years to come, so Constellations’ early foray into the marijuana sector is seen as a hedge against this threat.

In response to the news, shares of Constellation Brands is up around 6.5 percent, a significant move for a company with a market cap of around $36.3 billion. Over the past couple of months, Constellation has been increasing slightly and recovering from the drastic decline in share prices seen during Q4 2018. Dipping from $240 down to the $160 level during last quarter, today’s gains put STZ at $191.45 per share.

Constellation Brands Company Profile

Constellation Brands produces beer, wine, and spirits and is one of the largest multicategory alcoholic beverage suppliers in the U.S. The firm has the exclusive right to import and market several Mexican beer brands in the U.S., including the Corona, Modelo, and Pacifico brand families, and it acquired Ballast Point, a craft beer brand, in 2015. Constellation Brands’ wine and spirits portfolio includes the Robert Mondavi, Black Box, and Clos du Bois wine brands and Svedka vodka. The firm generates over 90% of its revenue in the U.S. – Warrior Trading News