Constellation Brands sees success in first quarter
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Constellation Brands sees success in first quarter

Constellation Brands, the alcoholic beverage giant behind market-leading brands like Corona beer and Svedka Vodka, reported earnings for the first quarter of fiscal 2020 at the end of last week. Higher sales amid a portfolio restructure reassured investors and sent the stock higher. With stronger demand for its outperformers, the selling-off of the lower-end of much of its portfolio, and an increased guidance range, Constellation’s future is looking bright.

Constellation Brands’ share price rallied at the end of last week, bringing year-to-date performance to +21%

Constellation July 3

Source: Yahoo Finance

Constellation Brands saw sales rise by 2% year on year to $2.1 billion. Beer continued to be a bright spot for the company, as it saw growth of 7.4% against the previous quarter – this is despite worries over trade, as Constellation sells a number of Mexican brands (Modelo, Corona, and others, as well as their numerous premium sub-brands) in the U.S. Operating income for this segment was particularly strong, rising by 11.7% against the same quarter in the previous year. On the wine and spirits front, the company was less successful, seeing a year on year decline in sales of 7.8% - but it’s worth noting that a number of the company’s poorer performers have been sold to E & J Gallo Winery for around $1.7 billion. That’s a transaction that should be closed in the second half of this year.

Speaking to the transformation of the company’s portfolios and the strength of the quarter just gone, Constellation’s CEO, Bill Newlands, said: “Our wine and spirits transformation strategy is working, led by our collection of Power Brands, which delivered industry leading depletion growth of 4% during the quarter. In addition, our iconic beer portfolio continues to be a cornerstone of growth in the U.S. beer industry driven by double digit depletion growth for Modelo Especial and Corona Premier.”

On the back of this strong start to 2020, Constellation Brands rose its full-year earnings forecast from a range of $8.50 to $8.80 per share, to a range of $8.65 to $8.95 per share.

Disclosure

Dominion holds Constellation Brands in its Global Trends Luxury Fund.


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