What is driving Constellation Brands, Inc. Class A (NYSE: STZ) stock

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Constellation Brands, Inc. Class A (NYSE: STZ) stock rose 6.36% on July 1st, 2020 and continued its bullish momentum on 2nd July, 2020 rising over 1.1% in the pre-market session (Source: Google finance). The company posted better than expected results for the first quarter of FY 21 driven by better-than-expected wine and spirit sales offset a miss in beer sales. The company’s beer production in Mexico has returned to “normal” levels in June, after COVID-19 pandemic-related disruptions. Further, the company generated 24% increase in free cash flow to $542 million for the first quarter of fiscal ’21. Capex totaled $144 million, which represents 7% below last year’s spend.

The company’s net loss for the first quarter to May 31 narrowed to $177.9 million from $245.4 million, in the year-ago period. Beer sales declined 4% to $1.38 billion, which is lower than  the FactSet consensus of $1.41 billion, while wine and spirits sales fell 4% to $579.3 million but beaten the expectations of $570.7 million.

STZ in the first quarter of FY 21 has reported the adjusted earnings per share of $2.30 or $2.44 if losses from its investment in Canopy Growth Corp. are excluded, beating the analysts’ estimates for the adjusted earnings per share of $1.99, according to the FactSet consensus. The company had reported 6 percent fall in the adjusted revenue to $1.96 billion in the first quarter of FY 21, beating the analysts’ estimates for revenue of $1.94 billion.

On the other hand, STZ acquired Empathy Wines, which is a high-performing, digitally-native wine brand and direct-to-consumer (DTC) platform co-founded by entrepreneur and media personality Gary Vaynerchuk with business partners Jon Troutman and Nate Scherotter. As part of the agreement, STZ will work with the Empathy Wines team for further scaling the brand’s growth, while leveraging their rich consumer insights and analytics, proven brand building expertise, and high-performing digital technology in order to build DTC and digital capabilities that STZ plans to scale across its wine and spirits brands to help deliver strong and sustainable growth for its portfolio.

Meanwhile, during the first quarter, STZ had successfully launched Corona Hard Seltzer, which has the great taste profile is driving a repeat purchase intent of almost 80%, and that exceeded the company’s expectations.

Additionally, during the first quarter, the company was able to issue debt at very favorable rates and use the proceeds to satisfy $700 million of debt coming due in November and pay down other near term maturities.

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