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Constellation Brands (NYSE:STZ) is the company behind top-selling wine and spirits brands, including Meiomi and Svedka vodka, but its growing demand for its specialty beer brands thats supporting the companys financials lately. Strong beer sales boosted the companys fiscal 2019 results, while slowing demand for wine and spirits has prompted it to divest some noncore brands. Heres how Constellation Brands performed last fiscal year and what its telling investors to expect in fiscal 2020.
Constellation Climbs After Reporting Profit Beat and Wine Sale
The companys net sales grew at a mid-single-digit rate in fiscal 2019, while net income increased substantially because of unrealized gains on its investment in marijuana company Canopy Growth, offset by a dip in operating margin from 30.1% to 29.7%.
Constellation Brands (STZ) Q4 Earnings & Sales Beat Estimates
The beer business performed best in the period. In fiscal 2019, shipment volume rose 9.7% because of strong demand for Modelo Especial, Corona Premier, and Corona Familiar. Net beer sales increased 11.6% to $5.2 billion, and operating income increased 11% to $2.04 billion.
Shipments in the wine and spirits business fell 0.8% in fiscal 2019, contributing to net sales and operating income declining 0.2% and 2.9% to $2.9 billion and $771 million, respectively. The companys best-performing wine and spirits brands in fiscal 2019 were Kim Crawford, Meiomi, Ruffino Sparkling, Cooper & Thief, and High West.
CEO Bill Newlands explained how selling the wine and spirits assets will affect the companys future:
Weve positioned our wine and spirits business for success with our announced plans to sell a portion of the business, which enables us to continue to strategically focus on our powerhouse, high-margin, high-growth brands. … Overall, were confident in our ability to drive top line growth of mid-to-high single digits over the next three to five years.
In fiscal 2020, we remain committed to increasing our quarterly dividend. Longer term, we expect the powerful cash generation capability of our core business to enable significant cash returns to shareholders of $4.5 billion in the form of share repurchases and dividends over the next three fiscal years.
Constellation Brands is guiding for fiscal 2020 earnings per share of between $8.50 to $8.80 on a comparable basis ($8.47 to $8.77 on an as-reported basis), which would be down from $9.34 in fiscal 2019. The company expects to deliver 7% to 9% net beer sales and operating income growth in fiscal 2020. However, wine and spirits sales will decline 25% to 30% because of its decision to sell certain brands, creating a 30% to 35% headwind to operating income for the wine and spirits business. Excluding the impact of lost sales because of the divestiture, the company is guiding for its remaining wine and spirits brands to deliver mid- to high-single-digit organic operating income growth.
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