by Adriana Cargill<\/p>\n
Constellation Brands Inc. exceeded analysts\u2019 expectations for its fourth quarter and projected strong gains in sales and earnings, driven by booming import beer sales in the U.S. But the stock, which has enjoyed a strong run in recent months, barely budged.<\/p>\n
In the quarter that ended February 28, the Victor, N.Y.,-based leading purveyor of beer, wine and spirits earned $214.6 million, or $1.06 per diluted share, up 37 percent from $157.2 million, or 79 cents per diluted share, in the year-earlier quarter. Analysts estimated 92 cents per share.<\/p>\n
Sales rose 5 percent to $1.36 billion compared with $1.30 billion in the same quarter a year ago. \u201cThey\u2019re still firing on all cylinders,\u201d said analyst Jon Staszak of Argus Research. \u201cImported beers are very popular, beer demand is very strong. They had a nice run, probably because of a great quarter and conservative guidance which led to tempered gains on the day; really great quarter. I\u2019m still bullish on the shares.\u201d<\/p>\n
The stock closed at a record high of $120.06, up 89 cents, or less than 1 percent. Analysts\u2019 consensus target price is $125. They estimate earnings in the new fiscal year ending next February of $4.81 per share, while the company stated in its earnings report that this year\u2019s earnings will be between $4.55 and $4.75 a share.<\/p>\n
In the full year ended February 28, Constellation Brands earned $839.3 million or $4.17 per diluted share, on sales of $6.03 billion, compared with earnings of $1.94 billion or $9.83 per diluted share, with sales of $4.87 billion a year ago. The decrease in earnings is largely attributable to a favorable accounting adjustment of $1.67 billion in the prior year.<\/p>\n
Constellation Brands growth last year was largely a result of its acquisition of a substantial Mexican beer business in 2014. Beer sales increased 12 percent, helped also by favorable pricing. Included in this portfolio are Modelo Especial, Pacifico, Victoria, Corona light and Corona Extra, the best selling imported beer in the U.S. according to Constellation\u2019s 2014 Annual Report.<\/p>\n
Dan Wood, an equity research associate at Morningstar, contends that Constellation will be able to sustain growth in the beer sector for the next 10 years. In an interview, Wood pointed out that its beer portfolio is popular with the U.S. Hispanic population, which is projected to continue growing, and that millennials tend to drink beers at higher price point than their parents, such as imported beers or craft beers.<\/p>\n
Wood said, \u201cThese trends are more generational; the growth in the Hispanic population and millennial spending power don\u2019t look like they\u2019re going to abate any time soon.\u201d<\/p>\n
Constellation CEO Rob Sands stated in a conference call he\u2019s excited about the prospect of more growth in the beer business. Sands said a current brewery expansion in Mexico is progressing as planned, on time and on budget.<\/p>\n
Sands said the company will continue to increase advertising and has invested in a joint venture glass manufacturing facility in Mexico.<\/p>\n
Nevertheless, he declared, this is \u201cthe year of the can.\u201d Sands said cans are \u201ca huge growth opportunity\u201d for the company; \u201caround 20 percent of the company\u2019s total business is in cans\u2026in an overall market that\u2019s around 50 percent cans.\u201d<\/p>\n
In the U.S., Sands went on, cans have gone from \u201csub-premium\u201d to very premium packaging as the craft beer sector has adopted cans and customers have largely accepted them.<\/p>\n
Wood pointed out while it remains to be seem whether customers will continue to accept cans as premium packaging, they are cheaper to produce than glass and would also allow Constellation to access consumers in stadiums, boats and beaches where glass is currently prohibited.<\/p>\n
Staszak said that one concern for Constellation\u2019s Mexican beer business is foreign currency fluctuations, which could adversely affect the bottom line with a strong dollar and a growing U.S. economy. But, he acknowledged, because the product is imported to the U.S. and sold in U.S. dollars he believes it\u2019s less of an issue. \u201cIt\u2019s a different story really, they\u2018re less vulnerable to currency fluctuations,\u201d Staszak said.<\/p>\n
Constellation\u2019s spirit business has also posted strong results in the past year, with sales growth around 8 percent, partially due to its innovative flavor extensions.<\/p>\n
\u201cIt\u2019s not something I would necessarily want to drink, but hey, if it\u2019s good for their bottom line\u2026\u201d said Wood. On the other hand, the company\u2019s traditional wine portfolio has seen lackluster performance. \u201cAnytime you have a portfolio, especially a legacy portfolio that\u2019s not growing, it\u2019s a concern for the company,\u201d he said.<\/p>\n
He noted that, while volumes fell slightly, the company got some pricing relief from decreased production costs. \u201cI\u2019m not overly concerned because their overall volumes are growing. Wine is a very competitive market and some of the wine issues [may] come from the fact that management was a little more focused on the beer portfolio.\u201d<\/p>\n
Constellation also announced it will begin a quarterly dividend for the first time in the company\u2019s 70 year history. The program is set to start for investors of record as of May 8, 2015 at 31 cents per share of Class A Common Stock and 28 cents per share of Class B Common Stock, payable May 22, 2015.<\/p>\n
Photo at top: The company’s Mexican beer portfolio includes Corona Extra, Corona Light, Negra Modelo, Pacifico and Victoria to name a few. (Adriana Cargill\/Medill)<\/p>\n","protected":false},"excerpt":{"rendered":"
by Adriana Cargill Constellation Brands Inc. exceeded analysts\u2019 expectations for its fourth quarter and projected strong gains in sales and earnings, driven by booming import beer sales in the U.S. But the stock, which has enjoyed a strong run in recent months, barely budged. In the quarter that ended February 28, the Victor, N.Y.,-based leading […]<\/p>\n","protected":false},"author":111,"featured_media":12793,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27,28,436],"tags":[],"class_list":["post-12782","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-general-interest","category-spring-2015"],"yoast_head":"\n