Leading wine and spirits distributor
Constellation Brands Inc.
) delivered adjusted earnings of 40 cents per share in the first
quarter of fiscal 2013, surpassing the Zacks Consensus Estimate and
prior-year period earnings of 39 cents. On a reported basis, the
company registered earnings of 38 cents per share.
Net sales in the quarter remained almost flat at $634.8 million
from the year-ago quarter. However, sales missed the Zacks
Consensus forecast Estimate of $646 million. On an organic basis,
net sales inched down 1% due to higher promotional costs and
decreased volume, partially offset by favorable product mix.
Cost and Margin Performance
Cost of products sold remained flat year over year to $384.2
million in the quarter, and based on revenues; it remained stable
at 60.5%. Consequently, adjusted gross profit and gross margin was
flat with the prior-year quarter's $250.6 million and 39.5%,
Selling, general and administrative expenses increased 4.2% to
$144 million in the quarter, and based on sales, it increased 90
basis points to 22.7% from the prior-year quarter, primarily due to
increased promotional and marketing expenses. Consequently,
Constellation Brands' adjusted operating income decreased 5.5% to
$106.6 million from $112.8 million in the year-ago quarter,
resulting in a contraction of 100 basis points in operating margin
Constellation Brands' cash and cash equivalents as of May 31,
2012 was $69.1 million. During the quarter, Constellation generated
$96.4 million of cash from operations compared with $241.3 million
in the previous year. During first-quarter 2013, the company
generated a free cash flow of $76.8 million compared with $220.3
million reported in the prior-year period.
During the quarter, the company repurchased 18 million shares of
common stock at a cost of $383 million under its ongoing $1 billion
share repurchase program. Constellation Brands expects to complete
at least 50% of the new authorization in fiscal 2013.
Fiscal 2013 Outlook
The company reiterates its fiscal 2013 adjusted earnings per
share guidance in the band of $1.93 to $2.03 per share compared
with $2.34 in fiscal 2012. The guidance factors in an interest
expense expectation in the range of approximately $210-$220
million, an approximate tax rate of 34% and weighted average
diluted shares outstanding of approximately 185-190 million.
On a reported basis, the company expects earnings per share in
the range of $1.89-$1.99 per share compared with $2.13 in fiscal
Moreover, the company anticipates generating a free cash flow in
the range of $425 million to $475 million.
Constellation Brands is the largest wine company in the world
with a strong portfolio of premium wine brands complemented by
spirits, imported beer and other select beverage alcohol products.
Constellation Brands competes with
) and privately held E. & J. Gallo Winery and Jackson Family
We currently have a Zacks #3 Rank (short-term Hold rating) on
the stock. Our long-term recommendation on the stock remains
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