Constellation Brands (STZ) Tops Q1 EPS by 3c; Boosts FY16 EPS Outlook; Will Acquire Meiomi Wine Brand

July 1, 2015 7:34 AM EDT

Constellation Brands (NYSE: STZ) reported Q1 EPS of $1.26, $0.03 better than the analyst estimate of $1.23. Revenue for the quarter came in at $1.63 billion versus the consensus estimate of $1.62 billion.

"Our excellent first quarter results reflect a great start to our new fiscal year. We delivered exceptional performance for our beer business, which is the primary driver of the upward revision to our EPS outlook for the year, and our brewery expansion continues to proceed as planned. Within our wine and spirits business, we experienced improving market trends for our U.S. wine business, posted better than expected results in Canada and delivered excellent dollar sales and depletion volume growth for our portfolio of spirits brands," said Rob Sands, president and chief executive officer, Constellation Brands.

"Today, we are also announcing that we have agreed to purchase the Meiomi wine brand, which is a high-growth, high-margin, scale brand that can be effectively integrated into our powerful portfolio of wine brands," said Sands. Launched in 2006, Meiomi has grown from a 60,000 case brand in 2010 to almost 600,000 cases in 2014 and is experiencing IRI dollar sales growth of more than 50 percent over the last 52 weeks. Meiomi's pinot noir is also among the fastest-growing, major pinot noir brands in the latest 12-week period. "This strong record of growth demonstrates how well the brand resonates with consumers. We are excited about Meiomi's prospects going forward under our efficient operating structure and strong route-to-market," added Sands. The purchase price for the brand is approximately $315 million, subject to post-closing adjustments. The transaction, which is subject to regulatory approval, is expected to close around the beginning of August and to be $0.03 - $0.04 accretive to EPS for fiscal 2016.

Constellation Brands sees FY2016 EPS of $4.80 - $5.00, versus the consensus of $4.88.

For fiscal 2016, the beer business is now targeting mid to high single-digit volume growth, net sales growth of approximately 10 percent, and 13 - 15 percent operating income growth. For the wine and spirits business, the company continues to expect net sales and operating income growth to be in the low to mid single- digit range before any benefit from the Meiomi acquisition.

Fiscal 2016 guidance also includes the following current assumptions, including the expected acquisition of the Meiomi wine brand:

  • Interest expense: approximately $325 - $335 million
  • Tax rate: approximately 30.5 percent
  • Weighted average diluted shares outstanding: approximately 204 million
  • Free cash flow: approximately $100 - $200 million
  • Operating cash flow: approximately $1.15 - $1.35 billion
  • Capital expenditures: approximately $1.05 - $1.15 billion, including $950 million - $1.05 billion for the beer business

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

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