Constellation Brands (STZ) Tops Q4 EPS by 4c; Announces Acquisition of The Prisoner Wine Company

(Updated - April 6, 2016 7:24 AM EDT)

Constellation Brands (NYSE: STZ) reported Q4 EPS of $1.19, $0.04 better than the analyst estimate of $1.15. Revenue for the quarter came in at $1.54 billion versus the consensus estimate of $1.52 billion.

"It has proved to be another dynamic year of significant accomplishments and impressive financial results for Constellation," said Rob Sands, president and chief executive officer, Constellation Brands. "In fiscal 2016, our beer business delivered industry-leading market results as the #1 growth contributor in the U.S. beer category, achieving stellar growth across the portfolio. We also acquired Ballast Point, one of the most awarded, major craft brewers in the industry, and solidified our position in the high-end segment of the U.S. beer market. We successfully completed our first 5 million hectoliter capacity expansion at our Nava brewery, and we began investing in a new, state-of-the art brewery in Mexicali, Mexico, in order to support the ongoing momentum of our iconic Mexican beer brands. In our wine and spirits business, we further strengthened the financial profile by channeling resources and brand-building investments toward higher-growth, higher-margin brands. This strategy, combined with the Meiomi wine acquisition, helped to drive healthy margin expansion and earnings growth. Overall, we are excited to build on the success of fiscal 2016, as we are targeting impressive results for the coming year," said Sands.

Today, the company announced an agreement to acquire The Prisoner Wine Company brands, a fast-growing, super-luxury portfolio of five highly rated wine brands that have grown volumes at an annual rate of 30% over the last three years to reach 175,000 cases in 2015. "This acquisition aligns with our portfolio premiumization strategy, enables us to capitalize on U.S. market trends that favor high-end wine brands and strengthens our position in the dynamic and margin enhancing super-luxury wine category," said Sands. The cash paid at closing for the deal is expected to approximate $285 million. The transaction is expected to close by the end of April 2016 and to be $0.03 to $0.05 accretive to EPS for fiscal 2017.

Constellation is also announcing today that the company is evaluating plans to execute an IPO for a portion of the Canadian wine business. "As part of our ongoing strategic efforts to identify opportunities to create value for our shareholders and strengthen the financial profile of our wine and spirits business, we are evaluating the merits of an initial public offering for a portion of our Canadian wine business," said Sands. "In fiscal 2016, our business in Canada delivered excellent overall financial results, outperformed the industry and gained market share, and we believe its full value is not being recognized. An IPO will create better visibility to this dynamic part of the business. A final decision regarding whether to pursue a potential initial public offering is expected to be made later this calendar year," added Sands.

Guidance:

Constellation sees FY17 EPS of $6.05 - $6.35 on a comparable basis and $6.00 - $6.30 on a reported basis.

Full-year fiscal 2017 guidance also includes the following current assumptions:

Interest expense: approximately $325 - $335 million

• Tax rate: approximately 29 percent
• Weighted average diluted shares outstanding: approximately 206 million
• Free cash flow: approximately $250 - $350 million
• Operating cash flow: approximately $1.5 - $1.7 billion
• Capital expenditures: approximately $1.25 - $1.35 billion

For earnings history and earnings-related data on Constellation Brands (STZ) click here.

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