Constellation Brandsis one of the largest beer, wine and spirits makers in the world with operations in the US, Canada, Mexico, New Zealand and Italy. It has 100 brands and 40 facilities worldwide.
It’s the No. 3 beer company in the US with popular imported brands such as Corona Extra, Corona Light and Modelo Especial.
It also owns popular wine brands including Robert Mondavi, Clos du Bois, Kim Crawford, Mark West and the Franciscan Estate and the premium spirits of SVEDKA Vodka, Casa Noble Tequila and High West Whiskey.
Beat Again in the Fiscal Third Quarter
On Jan 5, Constellation Brands reported its fiscal third quarter results and beat the Zacks Consensus Estimate by 24 cents. Earnings came in at $1.96 versus the consensus of $.172.
Constellation Brands has a great earnings surprise history. It hasn’t missed since 2014.
Net sales rose 10% in the quarter boosted by the beer business. Organic net sales growth in beer was 12%.
“Our beer business delivered double-digit sales and profit growth for the third quarter, and gained significant market share of the high-end of the U.S. beer category, as the #1 contributor to growth, with our key brands growing across all market channels,” said Rob Sands, CEO.
Raised Full Year Guidance
Given the big beat in the third quarter, it’s not surprising that the company raised full year fiscal 2017 guidance.
In response, the analysts also raised their full year estimates.
The 2017 Zacks Consensus Estimate jumped to $6.64 from $6.45 before the earnings report. That’s earnings growth of 22.2%.
5 estimates were also raised for fiscal 2018. That pushed the 2018 Zacks Consensus Estimate to $7.54 from $7.49. That’s another 13.6% earnings growth.
Constellation pays a dividend, which is currently yielding 1.1%. But it also has a $1 billion share repurchase program. In the third fiscal quarter it repurchased 2.4 million shares for $367 million.
Worries About Import Tariffs a Buying Opportunity?
Everything sounds great at the company. So why have the shares sunk over the last 2 months?
Because it’s such a big importer of tequilla and Corona beer from Mexico, investors are worried about tariffs impacting the business under a Trump Administration.
In response to these worries, the company has been increasing its investments in America craft whiskey companies.
But the weakness in the shares may present a buying opportunity.
Even with the recent sell off, the shares aren’t cheap. They still trade at 23x forward earnings. But this is cheaper than where they were at 2 months ago.
For investors looking for a high quality name in the wine and beer industry, and who are willing to take a risk on the Mexican business side of it, Constellation Brands is one to have on your short list.