USA: Constellation Brands’ Q1 earnings exceed analysts’ forecasts

Americans might be drinking less beer overall, but when they do, many of them reach for Modelo, the Market Insider reported on June 28.

Shares of Constellation Brands, the alchohol company behind Modelo, Corona, Svedka vodka, and Casa Noble tequila, were up as much as 8.4% in early trading on June 28 after the company reported fiscal 2020 first-quarter earnings that exceeded analyst forecasts.

Here's what analysts expected:

Earnings per share: $2.21 reported versus $2.05 (expected)

Revenue: $2.1 billion reported versus $2.07 billion (expected)

The company also upped its expectations for the rest of the year to the range between $8.65 and $8.95 per share — a 15-cent increase from previous forecasts.

The strong start to the 2020 fiscal year was driven by sales of Modelo and Corona. Beer sales grew 7% this quarter, led by Modelo, which is now the top market-share gainer for beer in the US. It posted sales growth of 17% this quarter. Mexican beer has become a staple in the company's portfolio after it sold off most of its wine and spirits brands to E&J Gallo Winery for about $1.7 billion in April.

Modelo's outperformance comes at a time when the alcohol industry is grappling with changing consumer tastes and declining beer consumption. Nonalcoholic beer and cocktail sales have exploded in popularity, and an increasing number of alcohol companies have also started marketing their drinks as wellness products to capture millennial and generation z consumers, who've been shown to drink less than older generations.

The company has a few initiatives to keep pace with the youngest consumers of its products. The company released Corona Refresca, a flavored malt beverage, in May.

In addition, the company has a 38% stake in Canopy Growth, the leading Canadian cannabis company. The investment shows that Constellation is poised to gain on the cannabis market as soon as it becomes legal in the US.

Prior to the June 28th’s gains, shares of Constellation brands were up 17% year-to-date.

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