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Constellation Brands (STZ) Jumps on Q1 Earnings Beat

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Constellation Brands Inc. (STZ - Free Report) , a leading international producer and marketer of beverage alcohol brands, released first-quarter fiscal 2018 results, wherein adjusted earnings of $2.34 a share surpassed the Zacks Consensus Estimate of $1.98. Moreover, the bottom line surged 52% from the year-ago quarter.

Backed by solid growth at its beer business, Constellation Brands raised its fiscal 2018 adjusted earnings forecast to $7.90–$8.10 per share from the previous guidance of $7.70–$8.00. However, the company tweaked its GAAP earnings estimate to $7.55–$7.75 per share, compared with $7.65–$7.95 anticipated earlier.

Earnings Estimate Revision: The Zacks Consensus Estimate has been stable in the last 30 days. Constellation Brands’ performance in the trailing four quarters (excluding the quarter under review) gives a positive picture. The company outperformed the Zacks Consensus Estimate by an average of 7.7% in the trailing four quarters.

Revenues: Constellation Brands generated net sales of $1,936 million that increased 3% year over year but lagged the Zacks Consensus Estimate of $1,949 million. The lag was primarily due to the recent sale of its Canadian wine business. However, this was offset by organic sales growth of 7% and benefits from recent acquisitions.

The company reiterated its sales targets for fiscal 2018. It continues to anticipate beer business sales to grow 9%–11% in fiscal 2018, while sales for the wine and spirits business is expected to decline 4%–6%. These estimates include the expected impact from the divestiture of the Canadian wine business and the benefits from High West, Charles Smith and Prisoner acquisitions.

Key Events: On Jun 16, Constellation Brands acquired Schrader Cellars’ iconic wines, which enhanced its fine wines portfolio. The Schrader Cabernet Sauvignon portfolio is the highest-rated American Cabernet Sauvignon portfolio consisting of wines sourced from the premier vineyards of Napa Valley. The agreement comprises vineyard sourcing, current inventories, and eight Schrader Cabernet Sauvignons. Terms of the deal remained under covers.

In Dec 2016, Constellation Brands completed the sale of its Canadian Wine business to Ontario Teachers' Pension Plan, which is Canada’s largest single-profession pension plan for C$1.03 billion. The sale forms a part of the company’s strategy to focus on premium, margin accretive, growth opportunities.

The company declared a quarterly cash dividend of 52 cents per share for Class A shares and 47 cents per share for Class B shares. These dividends are payable on Aug 23, to shareholders with record as on Aug 9.

Zacks Rank: Currently, Constellation Brands carries a Zacks Rank #2 (Buy) which is subject to change following the earnings announcement. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stock Movement: Constellation Brands’ shares jumped nearly 4.4% in the pre-market trading hours following the earnings release. Investors developed a positive sentiment following the company’s better-than-expected results and favorable fiscal 2018 view.

Check back later for our full write up on Constellation Brands’ earnings report!

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