Constellation Brands Inc.
), the largest wine company in the world, is scheduled to release
its first-quarter 2013 financial results before the opening bell on
Friday, June 29, 2012.
The current Zacks Consensus Estimate for earnings for the
quarter is 39 cents a share. For the first quarter, revenue is
expected to be $644 million, according to the Zacks Consensus
Fourth-Quarter 2012 Recap
Constellation delivered adjusted earnings of 69 cents per share
in the fourth quarter of fiscal 2012, outpacing the Zacks Consensus
Estimate of 38 cents and surging nearly two-fold from the
prior-year period earnings of 35 cents. The year-over-year increase
in the bottom line was primarily driven by benefits from negative
tax rates and improved margins.
However, sales in the quarter dropped 12.2% to $628.1 million
from the year-ago quarter. The fall was due to the divestitures of
the Australian and U.K. wine businesses, partially offset by
improved sales at North American business. Sales also missed the
Zacks Consensus Estimate of $633 million. The company's North
American organic constant currency net sales increased 5% driven by
improved volume and favorable product mix.
Apart from this, Constellation achieved a record free cash flow
of $715.7 million during fiscal 2012, enabling the company to
reduce debt, fund stock repurchases and make acquisitions.
Fiscal 2013 Outlook
The company expects its fiscal 2013 adjusted earnings in the
band of $1.93 to $2.03 per share compared with $2.34 in fiscal
On a reported basis, the company expects earnings in the range
of $1.89-$1.99 per share compared with $2.13 in fiscal 2012.
Moreover, the company anticipates generating a free cash flow in
the range of $425 million to $475 million.
The analysts covered by Zacks expect Constellation to post
first-quarter 2013 earnings of 39 cents a share, flat compared to
the prior-year quarter. Currently, the Zacks Consensus Estimate
ranges between 38 cents and 41 cents a share.
For fiscal 2013, the Zacks Consensus Estimate stood at $2.00 per
share, lower than the previous fiscal earnings of $2.34 per share.
The current Zacks Consensus Estimate for the fiscal ranges between
$1.95 and $2.04 per share.
Agreement of Estimate
Over the last 7 and 30 days, no movement in estimates has been
noticed either for the first quarter or fiscal 2013.
Magnitude of Estimate Revisions
With no earnings revisions by the analysts over the last 7 or 30
days, the Zacks Consensus Estimates for the first quarter and
fiscal 2013 remained unchanged at 39 cents and $2.00 per share,
With respect to earnings surprises, Constellation has topped the
Zacks Consensus Estimate over the last four quarters in an average
range of positive 34.6%, indicating that Constellation Brands has
surpassed the Zacks Consensus Estimate by that measure in the
trailing four quarters.
We believe that the company's strategic initiative of expanding
its foothold in the U.S. wine industry along with focus on brand
building and promotion will accelerate its growth opportunities
while strengthening its market position. Moreover, in an effort to
generate strong margins, Constellation Brands is also focusing on
higher priced segments across all key categories.
Moreover, the stake sale in the Australian and U.K. businesses
will help Constellation to focus on organic growth of its brand
portfolio, margin improvement, return on invested capital and free
cash flow. During the last two years, the Australian and U.K.
businesses were facing challenging market conditions, which were no
longer consistent with Constellation Brands' business strategy.
In addition, we believe the company's newly issued $600 million
worth of senior notes along with $1,650 million of new senior
credit facility will strengthen its financial position, and provide
liquidity to pay its current maturities with ease while focusing on
future growth prospects.
However, distilled spirits are subject to excise tax in various
countries. Rising fiscal pressure in the U.S., European and many
emerging markets may lead to increasing risk of a potential excise
tax on spirits by governments of respective countries. We believe
any excise tax increase in the future may have an adverse effect on
Constellation Brands' financial performance.
Above all, the company faces intense competition from other
well-established players in the industry, including
). Moreover, Constellation Brands also encounters competition from
local and regional players in the respective countries.
Consequently, this may dent the company's future operating
Currently, Constellation Brands holds a Zacks #3 Rank, implying
a short-term Hold rating on the stock. In the long term, we have a
Neutral recommendation on the stock.
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