Constellation Brands, Inc. (NYSE: STZ) stock rises on decent performance

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Constellation Brands, Inc. Class A (NYSE: STZ) stock rose 3.65% after the company posted better than expected results for the third quarter of FY 20 and raised its full-year outlook. The company, which brands include Corona, Robert Mondavi and Svedka, said net income for the quarter to Nov. 30 rose to $360.4 million from $303.1 million, in the year-ago period. Further, Wine and Spirits Power Brand strategy is gaining momentum as marketplace performance for these brands continues to outpace the overall category. The company has also recently closed the Black Velvet transaction, revised the original Wine and Spirits deal with Gallo, including a separate, but related agreement to divest the Nobilo Wine brand and signed an agreement with Kings & Convicts Brewing to divest Ballast Point.

STZ in the third quarter of FY 20 has reported the adjusted earnings per share of $2.14 including equity losses of 25 cents a share from its stake in Canopy Growth Corp., beating the analysts’ estimates for the adjusted earnings per share of $1.82, according to the FactSet consensus. The company had reported the adjusted revenue growth of 8 percent to $2 billion in the third quarter of FY 20, beating the analysts’ estimates for revenue of $1.95 billion. Net sales increased due to shipment volume growth of nearly 7%. Beer sales rose 8.3% to $1.31 billion to beat the FactSet consensus of $1.30 billion, and wine and spirits sales declined 9.7% to $688.8 million but beat expectations of $649.4 million.

The company raised its fiscal 2020 comparable EPS guidance range to $9.45 to $9.55 from $9.00 to $9.20. The increased FY 20 guidance now assumes the revised Wine and Spirits transactions and the Ballast Point transaction to be closed by the end of the fiscal ’20. The company expects the Nobilo transactions to close in the first half of fiscal ’21. After completing the transformation activities, the company believes the Wine and Spirits business will be positioned to produce mid-single-digit top line growth, while migrating to an operating margin of 30% over time.

Moreover, the company expects fiscal ’20 Wine and Spirits net sales and operating income to fall in the range of 8% to 10%. A part of the Wine and Spirits Transactions, the company is committed to the $130 million stranded cost reduction plan, which the company now expect to be realized over the fiscal ’21 to fiscal ’22 timeframe.

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