![](https://usercontent.one/wp/blog.midgardfinance.com/wp-content/uploads/2020/01/Constellation_Brands_Logo.png)
Constellation Brands issued a press release on its third quarter earnings before the opening bell with the following highlights.
- Generates reported basis EPS of $1.85 and comparable basis EPS of $2.14, including Canopy Growth equity losses of $0.25; excluding Canopy Growth equity losses, achieved comparable basis EPS of $2.39
- Generates $2.1 billion of operating cash flow and $1.5 billion of free cash flow, an increase of 5% and 14%, respectively
- Increases fiscal 2020 reported basis EPS outlook to $0.95 – $1.05; increases comparable basis EPS outlook to $9.45 – $9.55
- Increases fiscal 2020 operating cash flow target to approximately $2.3 billion and free cash flow projection to $1.5 – $1.6 billion
- Agrees to revise original Wine & Spirits agreement with Gallo in connection with Federal Trade Commission review; expected to close by the end of fiscal 2020
- In a separate, but related, transaction, agrees to divest Nobilo Wine brand to Gallo for $130 million; expected to close in first half fiscal 2021
- Signs agreement with Kings & Convicts Brewing to divest the Ballast Point brand and certain related facilities; expected to close by the end of fiscal 2020
- Promotes Garth Hankinson to Constellation’s CFO replacing David Klein who will assume the Canopy Growth CEO role
Volume, net sales, operating income and margins for wines and spirits (W&S) was down YoY for the quarter.
Vol (%) | Sales (%) | Income (%) | |
---|---|---|---|
Beer | 6.8 | -14.2 | 0.0 |
W&S | -13.5 | -9.7 | -12.4 |
![](https://usercontent.one/wp/blog.midgardfinance.com/wp-content/uploads/2020/01/STZ2020Q3-426x1024.png)
The poor performance in terms of EPS was attributable to further impairment losses of $534 million related to Canopy Growth.
![](https://www.midgardfinance.com/10q10k/S/STZ/us-gaap.Goodwill__.png)
![](https://www.midgardfinance.com/10q10k/S/STZ/us-gaap.IntangibleAssetsNetExcludingGoodwill__.png)
Given the headwinds caused by Canopy Growth it might be a while before Constellation Brands once more trades at its all time high of $234.22 from April 2018 despite some of the best operating margins in the industry.
![](https://www.midgardfinance.com/plot/price/_/breweries/evebitda/breweries_evebitda_2010-01-01_2020-1.png)
![](https://www.midgardfinance.com/plot/fundamentals/_/breweries/operatingMargin/breweries_operatingMargin_annual_sumFalse_2020-1.png)
![](https://www.midgardfinance.com/plot/fundamentals/_/breweries/revenue/breweries_revenue_annual_sumFalse_2020-1.png)
Reuters – Constellation raises profit forecast after beer-driven quarter
Bloomberg – Constellation Brands Jumps After Boosting Profit Forecast