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Constellation Brands Slip 10% On Weak FY Guidance

Shares of Constellation Brands (STZ) is currently down 10% after the beer and wine company issued a weak updated outlook for full year 2019.

The Corona brewer now expects fiscal year 2019 earnings of $12.95 to $13.05 per share and adjusted earnings of $9.20 to $9.30 per share. Analysts polled by Thomson Reuters currently estimate earnings of $9.43 per share for the year. Analysts' estimates typically exclude one-time items.

Previously, the company had estimated earnings of $9.60 to $9.75 per share for the fiscal year.

The company's $4 billion investment in Canopy Growth, a Canadian marijuana company, as well as the continued weakness in its wine and spirits business impacted its guidance for the full year.

The company recognized a decrease of $164 million in the fair value of Canopy investments for third quarter.

In November, Constellation expanded its portfolio beyond wine business and closed a $4 billion investment in the Canadian marijuana company Canopy Growth. It is also looking to sell some of its U.S.-based wine brands in a deal that could be worth more than $3 billion.

Constellation said the $4 billion Canopy Growth investment was financed using debt. The company estimates the interest expense associated with this deal to be about $55 million before tax with an approximate $0.25 impact on fiscal 2019 EPS results.

For fiscal 2019, the beer business now expects sales growth to be at the high end of the 9 to 11% range and operating margin to around 39%. For the wine and spirits business, the company now expects net sales and operating income to decline low-single digits.

For the third quarter, the company reported profit of $303.1 billion or $1.56 per share. Excluding items, Constellation Brands earned $2.37 per share, above Wall Street estimate of $2.06 per share. Net sales rose 9% to $1.97 billion, beating expectations of $1.91 billion.

STZ is currently trading at $154.94, down $17.40 or 10.10%, on the NYSE.

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