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Analysts Expect to Toast Constellation Brands’ Quarterly Earnings

Constellation Brands is set to report its fiscal first-quarter earnings Thursday morning and analysts who follow the drinks giant are expecting great things even as craft beer sales slow.

Unlike its rivals, which Nielsen reported experienced a sales slide for the 12 weeks ending June 17, Constellation’s beer sales rose 10.2 percent. For the same period, AB InBev saw its sales slide 4.2 percent and MillerCoors’ were down 4.0 percent.

Wells Fargo analyst Bonnie Herzog told investors in a note this week that Constellation Brands “remains our top beverage stock pick.”

Nielsen’s figures were for convenience-store sales. Wells Fargo, which conducted its own “Beverage Buzz” survey of 15,000 convenience stores nationally for Memorial Day, found 90 percent of those asked planned to expand shelf space for more of Constellation’s products.

Two Mexican Beer Brands Show Steady Growth

Cowen & Co.’s Vivien Azer expects Constellation Brands’ fiscal first quarter to deliver earnings per share of $2.01, 3 cents above the consensus of $1.98. She, too, cites its beer portfolio for driving growth, especially Corona, which represents just less than 50 percent of the company’s beer volumes.

She expects more advertising for the second Mexican beer brand, Modelo, which saw 45 percent growth in the draft category.

Azer said in her note to clients that the company’s third Mexican brand, Pacifico, suffered depletions of almost 20 percent in 2017 after eight consecutive years of growth. The brand still represents less than 3 percent of Constellation’s beer volumes.

Meanwhile, sales of its San Diego-based Ballast Point craft brand are lagging. Constellation has changed distributors in Massachusetts–its second-largest market–hoping to extract revenue by adding Ballast Point to its network of six distributors already in the state, Brewbound reported.

Top Constellation Brands executives believe beer will continue generating the company’s market-beating growth. Azer says that “on a reported basis, we are expecting operating income growth of 9.7 percent.”