Corona Distributor Beats Quarterly Sales, Profit Estimates Fueled by Mexican Beer Demand

support@smarteranalyst.com (Ben Mahaney)

Constellation Brands Inc (STZ), the U.S. distributor of Corona beer reported better-than-estimated fourth-quarter profits and sales driven by demand for Corona Fresca, Corona Premier and Modelo Especial beers.

This comes after news on Thursday that Corona will stop production, as the Mexican government deemed breweries as an unessential business. The alcohol beverage giant said sales in the fourth quarter ended February rose 6% to $1.9 billion beating estimates of about $1.8 billion. The company saw earnings of $2.06 per share surpassing estimates of $1.64 EPS.

Net income fell to $398 million, or $2.04 a share, from $1.24 billion, or $5.87 a share, in the year-earlier period.

“You see a lot of channel shift, and you see this in many recessionary environments,” Bill Newlands, President and Chief Executive Officer said in a CNBC interview on Friday. “This one, admittedly, is a bit uncharted because one piece is really closed, which is the on-premise [consumption], as you know, but you do see channel shifting and you see people buying more and you see them consuming it at home.”

Despite the solid results and positive outlook, Constellation Brands pulled its fiscal year 2021 guidance, citing the uncertainty surrounding the impact of coronavirus pandemic on its operations. Chief Financial Officer Garth Hankinson said the company has "significant" capacity under its $2 billion revolving credit buffers and plans to carefully manage its debt position over the next 24 months.

Wall Street analysts have a Moderate Buy consensus rating for the stock based on 10 Buys and 6 Holds. The $197.80 average price target puts the upside potential at 55% in the coming year. (See Constellation Brands’ stock analysis on TipRanks)   

Constellation Brands said that it made repurchases of about 266,000 shares of common stock generating $50 million in fiscal 2020. In addition, debt reduction amounted to more than $1.4 billion during the same year.

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