Constellation Brands (STZ 194.60, +10.92) has jumped 6.0% in pre-market after solidly beating earnings expectations for the first quarter.
The producer and marketer of beer, wine, and spirits reported above-consensus first quarter earnings of $2.34 per share on a 3.4% year-over-year increase in revenue to $1.94 billion, which was just shy of expectations.
Operating margin expanded by 530 basis points to 34.6% while operating income jumped 22.0% to $669 million.
Organic net sales increased 7.0% and the growth was partially offset by the impact of the divestiture of the Canadian wine business.
Beer net sales rose 8.0% thanks to volume growth and favorable pricing. President and Chief Executive Officer Rob Sands commented on the segment, saying, "The first quarter results for our beer business are a testament to the ongoing growth opportunities we have for our iconic portfolio of brands, which posted depletions of almost 12% for the quarter. Excellent execution during the Cinco de Mayo and Memorial Day holidays led to significant share gains, as Constellation remains the #1 growth driver in the high-end of the U.S. beer market. In addition, our new Corona Premier and Familiar products are delivering strong performance in test markets and they are well ahead of our expectations."
Wine and spirits net sales fell 4.0% while organic sales increased 6.0% due to the benefits of mix, price, and volume growth, which was outweighed by the net impact of the Canadian wine business divestiture less acquisition benefits. Shipment volume in the U.S. outpaced depletion volume due to timing.
The company expects positive trends to continue, evidenced by improved guidance for the fiscal year. Constellation Brands expects that full year earnings will be between $7.90 per share and $8.10 per share, up from previous guidance for earnings between $7.70 per share and $8.00 per share. The beer business is expected to record net revenue growth between 9.0% and 11.0% while segment operating income growth is expected to increase between 13.0% and 15.0%.
The wine and spirits business is expected to see its net revenue decline between 4.0% and 6.0% while segment operating income is expected to be flat. The company assumes its free cash flow will be between $725 million and $825 million for the fiscal year.