Get All Access for FREEMarket News & Research,
Live Transcripts & Audio,
and a whole lot more…
New York-based beverage company $STZ said it has agreed to purchase High West Distillery for approx. $160MM. This acquisition includes a portfolio of high-end American straight whiskies and other spirit brands at the greater than $30 retail price point. High West has experienced double digit volume growth in each of the last three years.
$STZ believes tax reform will be favorable to the company's previous low to mid-20s long-term effective tax rate guidance. Constellation Brands expect the new tax legislation, including the impact of the tax reduction and the transition will result in a reduction in the existing net deferred tax liabilities by $300-400MM.
$STZ said that it will not sell cannabis products in the U.S. or any other market as of now. Constellation Brands will consider selling them when it is legalized by the government. The company predicts that recreational marijuana will become legal in Canada during summer of 2018 and recreational edibles to become legal in the summer of 2019.
Wine and beer maker $STZ's sales fell marginally to $1.799Bil in 3Q18, while profit jumped 21% to $491MM or $2.44 per share compared to a year ago. Beer segment sales cheered Constellation Brands by growing 7.8% in the third quarter. However, wines and spirits division disappointed with a 10.3% drop in the sales.
Corona owner $STZ, which acquired 9.9% of stake in Canadian medical marijuana producer Canopy Growth in Oct. 2017, reported mixed results for 3Q18. Sales dropped, hurt by the wines and spirits division, while earnings increased, helped by the beer segment's performance. Constellation Brands increased its FY18 GAAP and non-GAAP EPS outlook.
With regards to the M&A activities, $STZ said that it is looking for M&A opportunities across all three categories (beer, wine and spirits). In the past, Constellation Brands had acquired a mix of categories including High West, Casa Noble, Charles Smith, and Funky Buddha.
$STZ stated that the earthquakes in Mexico did not impact production operations there. Constellation Brands believes that the recent natural disasters had a minor impact on 2Q17 results and may have some minimal impact on 3Q17 results, which has been factored into the updated guidance.
For FY18, $STZ targets net sales growth in the Beer division to be 9-11%. However, sales from Wine & Spirits business is estimated to decline 4-6%. Operating cash flow is expected to be $1.9-2.1Bil and capital spending is targeted to be $1.175-1.275Bil.
$STZ, which acquired craft brewer Funky Buddha in Aug. 2017, lifted its outlook for FY18 on the back of the strong Beer business results in 2Q18. GAAP EPS range hiked to $7.90-8.05 versus the previous estimate of $7.55-7.75. Non-GAAP EPS range upped to $8.25-8.40 versus the previous estimate of $7.90-8.10.
$STZ, the third largest beer company in the U.S., cheers with higher profit and sales results in 2Q18. Net income attributable to CBI soared 39% to $499.5MM or $2.48 per share, helped by the gains in Beer division during the summer season. Sales grew 3% to $2.09Bil, while non-GAAP EPS climbed 40% to $2.47.
$STZ said that in general the beer market is flat to down slightly. The company believes that the growth in the whole beer market lags because of the legal drinking age (21 years). $STZ added that domestic brands are dropping and the company is getting benefited by picking up that drop in the domestic business.
With regards to the M&A strategy, $STZ said that it continues to focus on returning cash to shareholders in the form of share repurchases and dividends and doing selective M&A, almost entirely in tuck-in type brands. $STZ will look for synergistic brands across beer, wine and spirit segments, which will fill niches that the company doesn't have.
Ballast Point business did not perform as per $STZ's expectations from a growth standpoint in 1Q18. The Corona beer maker, which acquired Ballast Point business in 2015, incurred an impairment charge related to the trademark value of the acquired brands in 1Q18. $STZ believes to achieve the targeted return on investment for this acquisition.
$STZ, which achieved a new all-time high stock price when market opened today, delivered its 16th consecutive quarter of double-digit comparable EPS growth in 1Q18. With the strong results achieved in the beer business during the quarter, the company lifted its comparable EPS outlook for FY18 to $7.90-8.10 from the previous estimate of $7.00-8.00.
$STZ expects EPS to be in the range of $7.55-7.75 in FY18. On a comparable basis, EPS is expected to be between $7.90 and $8.10. Constellation's BoD declared a cash dividend of $0.52 per class A common share and $0.47 per class B common share, payable on Aug. 23, 2017 to stockholders of record as of Aug. 9, 2017.
$STZ continues to expect its beer sales to grow 9-11% in FY18. The company reaffirmed its forecast of a 4-6% drop in wine and spirits sales. Interest expense is expected to be in the range of $340-350MM, and tax rate at 22%. Capital expenditure is forecast in the $1.175 - 1.275Bil range, and cash flow is estimated to be $725-825MM.