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Constellation Brands brings pleasant surprise with earnings update
Robust demand for Constellation’s beer brands has brought some welcome good news for one of the drinks giants, Ron Emler reports.
After missing Wall Street’s revenue estimates three times in the past two years, Constellation Brands surprised the market with its figures for the three months to the end of August, itself normally a strong sales period reflecting summer demand.
It beat analysts’ estimates of its adjusted earnings, achieving a double-digit rise to $4.32 per share against the consensus forecast of $4.08.
Net sales grew by 3% to $2.92 billion compared to a year ago, while also eclipsing expectations.
The better-than-expected results were generated by robust demand for its popular beer brands, especially Corona and Modelo, which continued to drive the business.
They have been the engine of Constellation’s progress since before the Covid lockdowns and continue to benefit from consumers switching to them and away from wines and spirits.
In the quarter, sales revenues increased by 6% compared with shipments rising by 4.6%, revealing Constellation continuing to benefit from premium prices.
President and chief executive Bill Newlands repeated the industry mantra of being cautious about the macro-economy but called the performance “strong”, pointing out that Constellation’s beers were the biggest gainers for the twelfth successive quarter.
Beer growth picks up the slack
Constellation had already issued the bad news about its wines and spirits arm, taking a US$2.5 billion write down in the quarter after a series of disappointing quarters.
The company said, however, that wines and spirits “continues to advance commercial and operational actions expected to drive sequential net sales and operating income improvements” in the second half of this financial year.
Despite the relative buoyancy of demand for its beers, last month the company cut its annual prediction of net sales growth to between 4% and 6% from an earlier range of 6% to 7%.
It tips its beer interests to generate net sales growth of 6% to 8% and operating income growth of between 11% and 12% for the full year. It made no numerical predictions about the market for wines and spirits.
At US$246, Constellation’s shares are flat this year, an achievement its total beverage alcohol peers would like to have emulated.
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