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Constellation Brands Posts Bright Earnings, Dim Guidance

Constellation Brands Posts Bright Earnings, Dim Guidance

Constellation Brands (NYSE: STZ) is down on Wednesday after posting a strong finish to fiscal 2013, but issuing weak guidance.

The Victor, New York-based firm posted fourth quarter EPS of $0.47, down 32 percent year-over-year. However, it topped the Wall Street consensus of $0.45 per share.

Fourth quarter revenue rose 11 percent to $696 million and blew away analysts' expectations of $666.6 million.

Full-year EPS declined nearly seven percent to $2.19, but beat estimates of $2.17.

Total FY 2013 revenue climbed 5.4 percent to $2.8 billion, edging expectations of $2.77 billion.

That's the Spirit

Constellation's wine and spirits sales grew eight percent during the fourth quarter, primarily due to an increase in volume and a favorable product mix.

For the year, sales in this segment increased three percent.

Raising the Bar

On February 14, Constellation and Anheuser-Busch (AB) InBev (NYSE: BUD) announced a revised agreement that will establish Crown Imports as a fully-owned entity of Constellation and the third-leading producer and marketer of beer in the United States.

Under the deal, AB InBev will acquire the remaining 50 percent of Grupo Modelo (OTC: GPMCY) it doesn't currently own. It will sell Grupo Modelo's brewery in Piedras Negras, Mexico and grant perpetual brand licenses to Constellation for $2.9 billion, subject to a post-closing adjustment. AB InBev will also sell Grupo Model's 50 percent ownership of Crown Imports to Constellation for $1.85 billion, giving the alcoholic beverage producer full ownership of Crown.

Investors should note the deal is far from finished. The US Department of Justice has challenged AB InBev's acquisition of the remaining 50 percent of Grupo Modelo. While all involved have reached an agreement in principle on a proposed resolution, proceedings have been delayed until April 23.

And, the deal also hinges on regulatory approval in Mexico, throwing another potential wrench into the equation.

A Toast With Interfood Importacao

On March 7, Constellation and Brazil's top imported wine distributor, Interfood Importacao, announced an agreement to for the importation and distribution of select Constellation premium wines and spirits into South America's largest nation.

Dim Guidance

Constellation expects EPS to close in the $2.55 to $2.85 range for fiscal 2014. At the middle-ground of $2.70, it would miss expectations of $2.75.

Dark Day on Wall Street

After two consecutive days of modest gains, Constellation is down a bit on word of its weak guidance. The stock rests around $48.50 as of this writing.

Constellation is down around 0.5 percent on Wednesday.


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