Constellation Brands today (5 October) lifted its forecast for annual earnings as beer shipments beat market expectations.
The Corona brewer now expects its annual earnings per share to come in at $9.60-9.80, versus its earlier prediction of $9.35-9.65.
A “double-digit” rise in sales from Constellation’s beer business in the three months to the end of August also meant the company could narrow its forecast for the division’s annual net sales growth.
The Modelo Especial brewer sees its beer net sales rising 8-9% in its 2024 fiscal year, compared to an earlier forecast of 7-9%.
Constellation maintained its forecast for net sales from its combined wine and spirits arm, which at best, it sees growing 0.5% or, at worst, declining 0.5%.
However, while the group’s second-quarter beer net sales were up 12%, from the wine and spirits division, they fell 14%. Excluding the impact of the sale of a clutch of wine brands to The Wine Group last year, Constellation’s wine and spirits net sales dropped 11%.
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President and CEO Bill Newlands said: “Our beer business this quarter delivered double-digit net sales and operating income growth. Modelo Especial continued to outperform the market as the top share gainer and solidified its position as the number one beer in US tracked channels.”
Constellation’s beer net sales during the quarter were $2.4bn, up 12% on a year earlier. Shipments rose 8.7% and depletions grew 7.9%. Divisional operating income was 10% higher at $953.9m.
Newlands added: “Our higher-end wine brands, Meiomi and Kim Crawford outperformed their corresponding segment in tracked channels and we continue to expect solid growth acceleration and margin improvement from our overall wine and spirits business in the second half.”
On an organic basis, excluding the sale of the clutch of brands to The Wine Group, Constellation’s wine and spirits business saw shipments fall 15.3% during the second quarter. The division’s operating income slid 19% to $80.7m.
Overall, second-quarter net sales increased 7% to $2.84bn. Operating income was up 20% at $979m. Net income attributable to Constellation rose 16% to $690m.
“Constellation’s beer business again looks to be one of the best (if not the best) volume growth stories in large cap staples, with stronger than expected shipments this quarter driving a sizeable earnings beat,” Barclays analyst Lauren Lieberman wrote in a note to clients. “That said, the outlook from here does imply some slowing – albeit to a rate that still implies organic sales growing in the mid-single digit range – which we’d expect is more a function of planning ahead for a trickier consumer environment versus indicative of anything the company is currently seeing in-market.”
She added: “The wine-and-spirits business on the other hand continues to struggle with the lower end of the portfolio more than offsetting solid results for premium-plus wine and craft spirits, and while the company reiterated its full-year guidance for the division, there is a steep second-half ramp required to hit those targets.”