Constellation Brands Beats Q3 Earnings Estimates, But Stock Sinks On Canopy Growth-Related Guidance Cut

Constellation Brands, Inc. STZ traded down 12 percent Wednesday after management cut 2019 guidance to account for its Canopy Growth Corp CGC investment.

Considering interest expenses for Canopy financing, the company now projects 2019 earnings per share between $9.20 and $9.30 against a previous Street estimate of $9.43. The figures exclude Canopy’s fourth-quarter equity earnings.

“We expect the powerful cash generation capability of our core business to enable significant cash returns of $4.5 billion to shareholders in the form of share repurchases and dividends within the next three fiscal years,” Constellation CFO David Klein said in the press release. “We plan to operate within our targeted leverage ratio, as we remain committed to maintaining our investment grade rating.”

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Report Highlights

By other metrics, Constellation demonstrated strength in its third-quarter report. The period brought sales of $1.97 billion against a $1.91 billion estimate, and a comparable EPS of $2.37 beat a $2.06 forecast.

Beer sales increased 16 percent year-over-year while wine and spirits rose 0.4 percent.

“The results delivered by our beer business mark the highlight of our third quarter performance,” CEO Rob Sands wrote in the press release. “The Modelo and Corona brand families continue to be on fire, fueled by strong velocities, excellent distribution gains and highly incremental innovation.”

Canopy decreased $164 million in value during the quarter, and Constellation reported $1.2 billion unrealized gain in its basis results since its November 2017 investment in the cannabis company. Management increased their investment by $4 billion this November.

Constellation traded around $153.64 at time of publication, down 10.8 percent.

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