Earnings Results: Constellation’s beer sales hurt by higher prices across supply and distribution chains

by | Jan 5, 2023 | Stock Market

Constellation Brands Inc.’s stock slid 9% Thursday — its biggest one-day decline since a drop of 11.8% on March 23, 2020, at the start of the pandemic — after the company reported earnings for its fiscal third quarter. Analysts’ focus on weakness in beer sales dominated the company’s earnings call. The company’s beer depletions, a metric that measures the number of cases sold by distributors to retailers, was 5.7% in the quarter, down from 8% to 9% in the past four quarters.

Depletions for the company’s Modelo Especial brand were just 4%, compared with 10% in the second quarter. “The multiple commanded by Constellation
STZ,
-9.05%
is heavily dependent on the reliability of Modelo’s nearly double-digit growth profile,” wrote MKM analyst Bill Kirk in a note to clients. Kirk was expecting beer depletions of 8%. “With another quarter of muted beer performance expected in the fourth quarter, we think investors are better served monitoring Modelo than stepping in and owning the equity,” he wrote. Kirk rates Constellation stock as neutral with a fair-value estimate of $238, which is about 12% above the stock’s current price. On a call with analysts, Chief Executive Bill Newlands acknowledged a “series of headwinds” that developed in the latter part of the quarter. Those included higher price increases than usual at the company in response to cost pressures across its supply chain. Other parties in the distribution chain also raised prices, he said. “Historically, the impact of these types of notabl …

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