Wine and spirits maker Constellation Brands, Inc. (STZ,CBR.AX,STZ-B) reported Friday a decline in first-quarter profit, driven primarily by promotional costs and a decrease in volume. The company reaffirmed its outlook for fiscal 2013. The shares surged about 22 percent in the morning trade.
Separately, Constellation Brands agreed to acquire the remaining 50 percent interest in Crown Imports joint venture, a leading beer importer in the U.S., for $1.85 billion. The deal is expected to close during the first quarter of calendar 2013. Constellation Brands currently owns 50 percent of Crown Imports LLC, a 50:50 joint venture with Grupo Modelo S.A.B. de C.V.
Constellation Brands has signed a definitive agreement with Anheuser-Busch InBev SA/NV (AB InBev) to purchase the remaining 50 percent interest in Crown as AB InBev completes its proposed acquisition of Modelo.
In addition, Constellation Brands said it agreed to purchase Mark West, the nation's best-selling pinot noir brand, for about $160 million. The transaction is expected to close in July and the company estimates the acquisition to be slightly accretive to its earnings per share for fiscal 2013.
The company said the acquisitions are expected to positively position the company for the future.
In the first quarter, the company's reported net income declined to $72 million from $74.5 million in the previous year. Meanwhile, earnings per class A common share improved to $0.38 from $0.35 per share a year ago, on lower share count.
Comparable net income declined 10 percent to $76 million. On a comparable basis, non-GAAP earnings per share improved 3 percent to $0.40.
On average, 8 analysts polled by Thomson Reuters expected earnings per share of $0.39 for the quarter. Analysts' estimates typically exclude one-time items.
Rob Sands, president and chief executive officer of the company said, "First quarter results were generally in line with our expectations. From an operational perspective, we are experiencing excellent marketplace momentum for our wine and spirits business and Crown's imported beer business."
Net sales for the quarter declined to $634.8 million from $635.3 million in the same quarter last year, which was also below analysts' estimate of $646.64 million. The company noted that Wine and spirits net sales on an organic constant currency basis decreased one percent reflecting higher promotional costs and a decrease in volume, partially offset by favorable product mix.
During the quarter, the company repurchased 18 million shares for $383 million.
For fiscal 2013, Constellation Brands still expects reported earnings per share to be in the range of $1.89 to $1.99 and comparable earnings per share of $1.93 to $2.03 and Eleven analysts anticipate earnings of $2.00 per share for the full year.
STZ is currently trading at $26.55, up $4.79 or 22.01 percent, on a volume of 4.28 million shares on the NYSE.
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