Beer is Constellation Brands “Powerhouse” for Growth – CEO

Outlook bright for beer, dimmer for wines and spirits.
Beers, like Corona, are driving Constellation Brands' sales.

Beer propelled Constellation Brands double-digit net sales growth in fiscal 2017, the company’s Chief Executive Rob Sands told analysts in Thursday’s earnings call. He expects a similar performance for fiscal 2018.

“Our beer business continues to be a powerhouse for growth. We exceeded our profit and margin goals for the year,” said Sands, adding the company was the “No. 1 growth contributor to the U.S. beer industry for the year.”

Robert Sands, CEO, Constellation Brands
Robert Sands, CEO

For Fiscal Year ’17, the company generated consolidated net sales growth of 12 percent.  Net sales for the beer business increased 17 percent.

Media buys will double in Fiscal ’18 for the company’s beer brands – Corona, Modelo and Pacifico – focusing on sports sponsorships with the NBA, the NFL, soccer and boxing.

Wine and spirits net sales increased 6 percent in Fiscal ’17.  This reflects a 4 percent increase in organic net sales on a constant currency basis driven primarily by volume growth and favorable mix, and the acquisition benefit primarily from their Meiomi and The Prisoner brands, Sands said. These benefits were partially offset by the divestiture of the Canadian wine business.

Wine and Spirits Sales Soften

While beer will be charging ahead, with projections of 9 – 11 percent in net sales growth and operating income in the 11 – 13 percent range for Fiscal ’18, the outlook for wine and spirits is dimmer, the company said.

Constellation expects net sales in wine and spirits to decrease in the range of 4 – 6 percent and operating income is forecast to be flat.

The company is forecasting earnings per share for FY18 of $7.70-$8.00 and announced a quarterly dividend of $0.52 a share.

Wells Fargo Managing Director, Equity Research Bonnie Herzog, in a note before the earnings call, told investors: “We continue to think STZ (Constellation Brands’ ticker symbol) has significant momentum and are encouraged by this quarter’s strong underlying results and FY18 outlook. We expect the stock to react favorably. STZ remains our top beverage stock pick.”

Published on April 6, 2017
Topics: Industry News



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