Alcoholic beverage maker Constellation Brands, Inc. (STZ,CBR.AX,STZ-B) on Wednesday reported a 15 percent increase in profit for the first quarter, reflecting strong sales and volume growth at its beer segment.
Adjusted earnings per share for the quarter beat analysts' expectations. The company raised its earnings outlook for fiscal 2016, citing the strong performance of its beer business.
Further, Constellation Brands said it has agreed to purchase the Meiomi wine brand for about $315 million, and that it expects the transaction to be accretive to its fiscal 2016 earnings.
New York-based Constellation Brands' net income for the first quarter was $238.6 million or $1.18 per Class A share, up from $206.7 million or $1.03 per Class A share in the prior-year quarter. Earnings per Class B convertible common stock increased to $1.09 from $0.95 in the year-ago period.
Excluding one-time items, adjusted net income for the latest quarter was $256.4 million or $1.26 per share, compared to $215.2 million or $1.07 per share in the year-ago quarter.
On average, thirteen analysts polled by Thomson Reuters expected the company to report earnings of $1.24 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter grew 7 percent to $1.63 billion from $1.53 billion in the same quarter last year. Analysts had a consensus revenue estimate of $1.62 billion.
Beer sales rose 11 percent, primarily due to higher volume, while wine and spirits net sales increased 1 percent. On an organic constant currency basis, wine and spirits net sales rose 4 percent, reflecting higher shipment volume and favorable mix.
Wine and spirits shipment volume increased 4.0 percent, while beer shipment volume grew 10.2 percent.
Looking ahead to fiscal 2016, Constellation Brands now forecasts reported earnings of $4.60-$4.80 per share and comparable earnings of $4.80-$5.00 per share. Earlier, the company forecast reported earnings in the range of $4.55 - $4.75 per share and comparable earnings of $4.70-$4.90 per share. Analysts expect the company to report earnings of $4.88 per share for the year.
Constellation Brands now expect sales growth of about 10 percent for its beer business in fiscal 2016.
In addition, Constellation said the Meiomi transaction, subject to regulatory approval, is expected to close around the beginning of August 2015 and to be accretive by $0.03-$0.04 per share to its earnings per share for fiscal 2016.
The company noted that the Meiomi wine brand is a high-growth, high-margin, scale brand that can be effectively integrated into its own portfolio of wine brands.
Launched in 2006, Meiomi has grown from a 60,000 case brand in 2010 to almost 600,000 cases in 2014. The brand is experiencing IRI dollar sales growth of more than 50 percent over the last 52 weeks.
On Tuesday, Constellation's board of directors declared a quarterly cash dividend of $0.31 per share of Class A common stock and $0.28 per share of Class B common stock. The dividends are payable on August 25, 2015 to stockholders of record as of the close of business on August 11.
STZ closed Tuesday's trading at $116.02. In Wednesday's pre-market activity, the stock is up $2.98 or 2.57 percent to $119.00.
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