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Constellation Brands Q4 Profit Surges On Strong Beer Sales, Beats View

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Alcoholic beverage maker Constellation Brands, Inc. (STZ,CBR.AX,STZ-B) on Wednesday reported 92 percent surge in profit for the fourth quarter from last year, as results at its beer segment were bolstered by the acquisition of Grupo Modelo's S.A.B. de C.V.'s (GPMCF) U.S. beer business.

Adjusted earnings per share for the quarter beat analysts' expectations, while revenue matched their estimates. Looking ahead, the company forecast comparable earnings for fiscal 2015 above Street estimates.

The New York-based world's largest wine company reported net income for the fourth quarter of $157.2 million or $0.79 per share, up from $81.7 million or $0.43 per share in the prior-year quarter. Earnings per Class B convertible common stock increased to $0.73 from $0.39 in the year-ago period.

The company completed its acquisition of its joint-venture partner Mexican brewer Grupo Modelo's U.S. beer business from Anheuser-Busch InBev (BUD) for about $4.75 billion on June 7, 2013.

This includes the acquisition of Grupo Modelo's 50 percent stake in Crown Imports LLC for $1.85 billion, and the acquisition of Piedras Negras brewery in Mexico as well as the perpetual brand rights for Corona and all other Modelo brands in the U.S. for $2.9 billion.

Excluding one-time items, adjusted net income for the quarter was $162.1 million or $0.81 per share, compared to $90.3 million or $0.47 per share in the year-ago quarter.

On average, ten analysts polled by Thomson Reuters expected the company to report earnings of $0.76 per share for the quarter. Analysts' estimates typically exclude special items.

Total net sales for the quarter grew 86 percent to $1.29 billion from $695.9 million in the same quarter last year, and matched analysts' consensus revenue estimate of $1.29 billion.

The sales growth was driven by $598 million of incremental net sales related to the consolidation of Crown's commercial beer business. Net sales for the beer segment rose 13 percent from the year-ago period, primarily due to volume growth driven by strong consumer demand.

Wine and spirits net sales on an organic constant currency basis rose 1 percent, as volume growth was mostly offset by unfavorable mix and higher promotional expenses. Wine and spirits shipment volume rose 4.3 percent, while beer shipment volume increased 9.9 percent.

Due to the timing of the close of the beer acquisition, the company did not recognize equity earnings from its original 50 percent interest in the Crown joint venture during the fourth quarter. For the prior-year quarter, the company recorded $50 million of equity earnings for the Crown joint venture.

Looking ahead to fiscal 2015, Constellation Brands forecasts earnings per share of $3.75 to $3.95 on a reported basis, and $3.95 to $4.15 per share on a comparable basis. This compares to fiscal 2014 reported earnings of $9.83 per share, and comparable earnings of $3.25 per share.

Analysts expect the company to report earnings of $3.95 per share for the year.

The company said that for the beer segment, it targets mid-to-high single digit net sales growth, while operating income growth is projected in the low-to-mid 20 percent range. For the wine and spirits segment, the company expects net sales and operating income growth in the low-to-mid single digit range.

Constellation Brands noted that its free cash flow estimate for the year of $425 million to $500 million will be impacted by higher levels of capital investment than it originally planned for its Nava, Mexico brewery expansion.

The total brewery expansion investment is now targeted in a range of $900 million to $1.1 billion and the company expects to complete this project in calendar 2016.

STZ closed Tuesday's regular trading session at $81.48. In Wednesday's pre-market, the stock is trading at $85.00, up $4.20 or 5.20 percent.

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