Constellation Brands results beat on higher demand for Mexican beers

(Reuters) - Constellation Brands Inc STZ.N reported fourth-quarter sales and profit on Thursday above Wall Street estimates, driven by strong demand for high margin Corona and Modelo beers and expensive wines such as Meiomi.

The boost in demand for Mexican beers is a result of a growing Hispanic population, a demography the company has been focusing on to widen its consumer base. The strategy helped the company’s sales beat estimates for the third straight year.

The Hispanic population is the second-fastest growing ethnic group in the United States and accounted for 18 percent of the total population in 2016, according to Pew Research Centre.

Beer sales, which accounted for about 77 percent of the net sales in the quarter, rose nearly 12 percent to $997.2 million.

Net sales rose 8.5 percent to $1.77 billion in the quarter, beating the analysts’ estimate of $1.75 billion that the maker of Robert Mondavi wines and SVEDKA vodka was expected to generate.

To cater to the rising demand, Constellation, which imports most of its beers from Mexico, said it would spend $900 million in 2019 to expand capacity of its breweries in Ciudad Oberon that lies south of the border.

Constellation shares rose 3 percent on Thursday after the company said it would pay its Class A and Class B shareholders a 42 percent hike in dividend.

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The stock is one of the top-performers compared with its peers over the past 12-months, rising nearly 40 percent.

The company is also on a drive to “premiumize” its portfolio and has added Craft beers such as Funky Buddha and Napa Valley winery Schrader Cellars, which sells wines for as much as $250 a bottle.

Constellation on Thursday forecast fiscal 2019 comparable earnings per share to be between $9.40 and $9.70. The mid-point was marginally below the Street’s estimate of $9.58.

However, analysts said the company’s forecasts are often conservative and are updated through the year.

Net income attributable to the company more than doubled to $925.5 million, or $4.64 per Class A share, in the quarter ended Feb.28, helped by a $363 million gain due to changes in the U.S. tax law.

Excluding items, the Victor, New-York based company earned $1.90 per share, beating the average analyst estimate of $1.74 per share, according to Thomson Reuters I/B/E/S.

Reporting by Uday Sampath and Siddharth Cavale in Bengaluru; Editing by Anil D’Silva and Arun Koyyur