Alcoholic beverage maker Constellation Brands, Inc. (STZ, STZ-B) reported Wednesday a profit for the fourth quarter that declined from last year, reflecting higher interest expenses and provision for income tax. Both adjusted earnings per share and quarterly sales topped analysts' expectations. Further, the producer of Robert Mondavi wines provided earnings forecast for the full-year 2014, in line with Street view.
The Victor, New York-based world's largest wine company reported a net income of $81.7 million or $0.43 per share for the fourth quarter, lower than $103 million or $0.51 per share in the prior-year quarter. Excluding items, adjusted net income for the quarter was $90.3 million or $0.47 per share, compared to $138.1 million or $0.69 per share in the year-ago quarter.
On average, nine analysts polled by Thomson Reuters expected the company to report earnings of $0.45 per share for the fourth quarter. Analysts' estimates typically exclude special items.
Total net sales for the quarter grew 11 percent to $695.9 million from $628.10 million in the same quarter last year, and topped nine Wall Street analysts' consensus estimate of $666.57 million. The sales growth benefited from the Mark West acquisition.
Wine and spirits net sales on an organic constant currency basis increased eight percent, primarily due to an increase in volume and favorable product mix.
Interest expense for the quarter increased 26 percent to $60 million from last year, primarily due to higher average borrowings. Provision for income tax was $25.1 million, compared to an income tax benefit of $22.5 million last year.
The company noted that its Crown joint venture generated net sales of $528.2 million, an increase of one percent from last year. Its equity earnings from the 50 percent interest in the Crown Imports joint venture grew 2 percent to $50.4 million from the prior-year quarter.
In mid-February, Constellation agreed to buyout joint-venture partner Mexican brewer Grupo Modelo S.A.B. de C.V.'s (GPMCY) 50 percent stake in Crown Imports LLC for $1.85 billion. It also agreed to buy the Piedras Negras brewery in Mexico and the perpetual brand rights for Corona and all other Modelo brands in the U.S. for $2.9 billion. The deals are expected to close in the first quarter or shortly thereafter.
"Constellation will become a fully independent beer competitor in the U.S. and will have perpetual rights for all Modelo brands with autonomous control of distribution, marketing, promotion and pricing," President and CEO Rob Sands said in a statement.
"Overall, this transaction will nearly double the sales of our company, significantly enhance our earnings and free cash flow, diversify our profit stream and provide new avenues for growth," Sands added.
For fiscal 2013, the company reported net income of $387.8 million or $2.04 per share, lower than $445 million or $2.13 per share in the prior year. Excluding items, adjusted net income was $416 million or $2.19 per share. Analysts expected the company to report earnings of $2.17 per share for fiscal 2013.
Total net sales for the full year grew 5 percent to $2.80 billion from $2.65 billion in the previous year. Street was looking for full-year 2013 revenues of $2.77 billion.
Looking ahead to fiscal 2014, the company now expects comparable earnings in a range of $2.55 to $2.85 per share, with Street currently looking for earnings of $2.75 per share. The company also projects free cash flow of $475 million to $575 million for the full-year 2014.
STZ closed Tuesday's regular trading session at $48.63, up $0.04 on a volume of 2.62 million shares. In the past 52-week period, the stock has been trading in a range of $18.50 to $49.23.
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