Constellation Brands Inc (STZ.N) forecast earnings for its current fiscal year well below Wall Street estimates, as it spends more to market new wines, sending its shares down as much as 13.9 percent and making it the top loser on the New York Stock Exchange.
The world's largest branded wine maker said it expects sales this year to grow in line with the U.S. wine and spirits industry, which is thawing out as the economy recovers and more people go to bars and restaurants.
But profit growth will be tempered by marketing and sales investments, said the company, which has added wines like Simply Naked, Primal Roots and The Dreaming Tree to a portfolio that already includes Robert Mondavi and Ravenswood.
The company also cited a sharp drop in free cash flow this year due to the absence of tax benefits that boosted cash flow in fiscal 2012.
Constellation said on Thursday that it expected earnings of $1.93 to $2.03 per share, excluding one-time items, for fiscal 2013, which began March 1.
That compares with analysts' average estimate of $2.23 per share, according to Thomson Reuters I/B/E/S. Constellation earned $2.34 per share in fiscal 2012.
Constellation also said it expected to complete half of a new $1 billion share buyback authorization this year. Coupled with its existing buyback authorization, Constellation said it expects to spend $550 million to $600 million this year buying back shares, which is more than some analysts expected.
UBS analyst Kaumil Gajrawala said the greater-than-expected share buybacks made the 2013 forecast "even more disappointing."
Still, Gajrawala said he was encouraged by Constellation's sales trends and reiterated his "buy" rating on the stock.
BY THE NUMBERS
For the fourth quarter of fiscal 2012, ended February 29, Constellation reported net income of $103 million, or 51 cents per share, down from $279.8 million or $1.32 per share a year earlier.
Excluding restructuring and other charges, earnings were 69 cents per share, which blew past analysts' average estimate of 39 cents, according to Thomson Reuters I/B/E/S.
Sales fell 12 percent to $628 million. The decline largely stemmed from Constellation's sale of its Australian and British wine business. North American sales rose 5 percent, helped by volume growth and a better mix of products.
Equity income from the company's half of a joint venture with Mexico's Grupo Modelo GMODELOC.MX that imports Corona beer into the United States rose 2 percent.
Constellation shares were down $3.14 or 12.7 percent at $21.55 in morning trading, off an earlier low at $21.27.
(Reporting by Martinne Geller in New York and Jessica Wohl in Chicago; Editing by Gerald E. McCormick, Lisa Von Ahn and Matthew Lewis)