Constellation Brands (STZ 172.72, +11.32) has spiked 7.0% in reaction to better than expected fourth quarter results, upbeat guidance, and a dividend hike.
The wine, beer, and spirits distributor delivered above-consensus fourth quarter earnings of $1.48 per share on a 5.5% year-over-year increase in revenue to $1.63 billion, which was also ahead of expectations. In addition to reporting solid results, the company's Board of Directors approved a 30.0% increase to the company's dividend for Class A and B shares. The Class A quarterly dividend was raised to $0.52 per share and the Class B dividend was increased to $0.47 per share.
During the fourth quarter, beer net sales grew 11.0%, thanks to a 10.0% jump in organic net sales, which was driven by volume growth of nearly 9.0% and favorable pricing. Segment operating income jumped 21.0% to $338.70 million.
Wine and spirits net sales were unchanged. Organic net sales grew 4.0% and there was an acquisition benefit from Prisoner, Charles Smith, and High West Brands. However, that growth was offset by the divestiture of the company's Canadian wine business. Segment operating income increased 6.0% to $196.10 million, benefitting from an improvement in gross margin (to 43.73% from 42.58%).
Constellation Brands benefited from a moderate decline in the effective tax rate, which was 26.5% in 2017 after reaching 29.3% in 2016.
Looking ahead, the company expects to generate full year earnings between $7.70 and $8.00 per share, which is above current market expectations. Beer net sales are expected to increase between 9.0% and 11.0% with segment operating income growing between 11.0% and 13.0%. Wine and spirits net sales are expected to be down between 4.0% and 6.0% with flat segment operating income.
With today's advance, shares of Constellation Brands have returned into the neighborhood of the all-time high ($173.55) that was notched at the start of October. Including today's gain, the stock is up 12.7% so far in 2017.