Constellation Brands Inc (STZ.N), the world's largest wine company, posted lower-than-expected quarterly earnings on Tuesday after higher grape costs hurt margins.
Yet the maker of Robert Mondavi and Ravenswood wines raised its forecast for the full fiscal year, saying more attractive financing terms for its recent beer acquisition should lead to lower interest expense.
Its shares fell 0.3 percent to $53 in early trading.
Wine profits were disappointing, but that segment is less important now that Constellation bought the U.S. business of Mexican brewer Grupo Modelo GMODELOC.MX, said Suntrust Robinson Humphrey analyst William Chappell.
"We are pleased to see higher guidance but continue to believe that the guidance will prove conservative with the help of synergies from the deal," Chappell said.
The $4.75 billion purchase last month gives Constellation beers like Corona Extra and Negra Modelo and makes it the No. 3 U.S. beer company behind Anheuser-Busch InBev (ABI.BR) and Miller Coors (TAP.N) (SAB.L).
In the first quarter ended on May 31, net income was $52.9 million, or 27 cents per share, down from $72.0 million, or 38 cents per share, a year earlier.
Excluding items such as costs related to the acquisition, earnings were 38 cents per share. On that basis, analysts on average were expecting 40 cents, according to Thomson Reuters I/B/E/S.
Net sales rose 6 percent to $673.4 million. Analysts had forecast $674.4 million.
For the full year, Constellation said it expected earnings of $2.60 to $2.90 per share, excluding items, up from a prior forecast of $2.55 to $2.85.
(Reporting by Martinne Geller in New York; Editing by Lisa Von Ahn)