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Shares of Constellation Brands Inc. (NYSE: STZ ) rose 2% on Friday, a day after the company reported mixed results for the third quarter of 2023. The brewer also cut its full-year earnings outlook. Here’s a look at the good and the bad from the Q3 earnings report:
mixed results
For the third quarter of 2023, Constellation posted net sales of $2.44 billion, up 5% compared to the same period a year ago and ahead of the consensus target of $2.40 billion. Adjusted EPS was $2.83, down 9% from the year-ago quarter and short of estimates of $2.90. On a reported basis, EPS rose 2% to $2.52. Comparable EPS, excluding Canopy, was $3.01, down 12% year over year.
Power in beer
In Q3, net sales at Constellation’s beer business grew 8% YoY to $1.89 billion, driven by strong demand and higher average price increases. Shipment volume rose 3% in the quarter. Growth decreased by around 6%, driven by strong performance by the brands Modelo Especial, Modelo Chelada and Pacifico.
Although depletion slowed in Q3 from Q2 due to additional price falls and lower distribution growth, the company expects the additional price impact to end in the coming months even if distribution growth appears to be normal.
Modelo Especial produced a 4.4% decline in Q3. The brand continues to strengthen its position in key markets with significant opportunities for additional expansion. Depletion for Pacifico and Modelo Chelada grew by more than 40% in the third quarter. A large part of Modelo Chelada’s revenue is driven by new product launches and the company expects significant growth from this brand.
Constellation raised its sales guidance for its beer business and now expects growth of 9-10% for FY2023 compared to its previous range of 8-10%. Operating income will now grow by 4-5% compared to the previous range of 3-5%.
Reduce wine and spirits
Net sales in the wine and spirits segment fell 4% to $544.6 million in Q3 due to lower shipments and lower sales. Shipments fell by nearly 15% while depletion fell by approx. 6% during the quarter. On an organic basis, sales fell 1% and shipments fell nearly 13%.
Constellation continues to expect organic net sales for its wine and spirits business to decline 0-2% in FY2023. Operating income is expected to grow by 3-5%.
The guide is cut
Constellation slashed its earnings outlook for fiscal year 2023 which did not perform well. The company cut its comparable EPS range, excluding Canopy, to $11.00-11.20 from the previous range of $11.20-11.60. Additionally, reported EPS will now be between $0.15-0.35 versus the previous range of $0.75-1.15.
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