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Constellation Brands Stays Prim Despite Coronavirus Outbreak

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Amid the coronavirus outbreak in China, which has been walloping all sectors, Constellation Brands Inc (STZ - Free Report) is one of the very few companies that remain unaffected. With numerous speculations doing the rounds, the company came up with its own version of the story. It rejected all claims regarding the impact of the virus on its business as well as unfavorable consumer response to its Corona beer brand. In fact, the company stated that its employees, facilities and operations continue to perform well, contrary to many reports.

Further, Constellation Brands has been able to steer clear of this situation as it doesn’t have much exposure to international markets, including China, which is the most affected region. In fact, this beer retailer derives most of its sales from the United States. 

Notably, the company is pleased with Corona Extra performance, with 5% sales growth for the latest the four-week period ended Feb 16, per recent IRI retail trends. Also, depletion trend for the brand, starting from the first two months of 2020 through Feb 26, surpassed its year-over-year trend. Moreover, the IRI dollar sales trend for the entire Corona brand has exceeded its 52-week trend in the latest four-week and 12-week periods. Apart from these, the company stated that all business categories have been witnessing sturdy sales trend so far this year. 

In January 2020, the company reported robust third-quarter fiscal 2020 results, marking the eighth consecutive earnings and sales beat. In the reported quarter, sales improved 7.3%, marking the 39th straight quarter of growth, on the back of a 6.8% rise in shipment volumes and 7.3% overall depletion growth.

Solid portfolio depletions mainly stemmed from continued strength in the Modelo and Corona brand families as well as continued innovation. Speaking of the Corona brand, sales grew 7% in IRI channels on sustained strength of Corona Premier, innovation at Corona Refresca and renewed growth of Corona Extra. Going ahead, management estimates 7-8% net sales growth for the beer in fiscal 2020.

Price Performance

The launch of Corona hard seltzer slated in spring 2020 alongwith constant brand-building, innovation and premiumization efforts position Constellation Brands well for long-term growth. Notably, shares of this Zacks Rank #3 (Hold) company have lost 6.5% in the past three months compared with the industry’s decline of 16.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks Facing the Heat

Other beverage companies that recently provided updates on the estimated impacts of the virus spread on its results are Diageo plc DEO, Coca-Cola KO and Anheuser-Busch BUD.  

Diageo anticipates the negative impact of the coronavirus outbreak on its fiscal 2020 organic net sales to be £225-£325 million and organic operating profit to be £140-£200 million. Meanwhile, Coca-Cola expects the COVID-19 to hurt its first-quarter 2020 organic revenues by 1-2 percentage points, unit case volumes by 2-3 percentage points and earnings per share by 1-2 cents. 

AB InBev stated that the outbreak has caused nearly $285 million of lost revenues and $170 million of lost EBITDA in the first two months of 2020. For the first quarter of 2020, AB InBev expects EBITDA to decline nearly 10% due to the impact of COVID-19 as well as a challenging market in Brazil.

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