Constellation Brands (STZ) will report first quarter (May) results tomorrow morning at 7:30 a.m. and management will host a call to discuss these results at 10:30.
Analysts expect first quarter comparable EPS down 6% with revenue up 1% to $2.07 billion. Constellation has exceeded estimates on the top and bottom line six consecutive quarters.
Last quarter, the company reported strong results due to continued strength in its Mexican beer business.
The company guided for fiscal 2020 EPS of $8.47-8.77 with beer net sales and operating income up 7-9% with Wine and Spirits net sales down 25-30% accomanied by a 30-35% decrease in operating income due to the divestiture of its low-end wine and spirits business to E. & J. Gallo Winery for $1.7 bln. The company also forecasted aoperating cash flow target of ~$2 bln and free cash flow of $1.1-1.2 bln.n
The company divested its low-end wine and spirits business to focus on faster growing segments of the adult beverage market: its Mexican beer business and premium wines and spirits. The FTC requested more information regarding the transaction last month.
Constellation views its 77% stake in Canadian cannabis leader Canopy Growth (CGC) as a call option on the budding industry.
Constellation's three to five-year growth outlook calls for 10% comparable basis EPS growth CAGR, high single-digit EBIT CAGR and a mid-to high-single digit net sales growth CAGR. That outlook includes high single digit beer sales and low to mid-single digit wine and spirits growth.
Constellation has a $36 billion market cap and trades at ~17x EV/EBITDA, a slight premium to the average large cap brewer/distiller, but a discount to Diageo (DEO), Brown Forman (BF.B) and Boston Beer (SAM).