(Reuters) - Constellation Brands Inc (STZ.N) raised its full-year profit forecast and reported better-than-expected quarterly sales and profit on Thursday, as it benefited from strong demand for Corona beers during the summer, sending its shares up as much as 7 percent.
The company launched the first major addition to the Corona franchise in nearly three decades earlier this year, the low-carb, low-calorie Corona Premier, aimed at seducing millennial consumers as it battles competition from craft beers.
Corona Premier and Corona Familiar, a product launched for Hispanic markets, have both continued to exceed expectations, Constellation said.
These additions, and its slightly more expensive brand Modelo, drove beer sales up about 11 percent to $1.53 billion in the second quarter.
“The new innovation is clearly working well... they are consolidating quite a lot of share in the beer category,” Cowen analyst Vivien Azer said.
Its wine and spirits business, which sells Nobilo and Meiomi wines, also reported 9.3 percent sales growth as it is shipped more cases during the second quarter in preparation for the key holiday season and its expectations that transportation would get more competitive during the third quarter.
Chief Financial Officer David Klein said he expects most of the shipment timing benefit experienced during the second quarter in the wine and spirits business to reverse in the third quarter, forecasting net sales and operating income in the unit to be down low single digits.
For the year ending February 2019, the Victor, New York-based company now expects to post an adjusted profit of between $9.60 and $9.75 per share, compared to its earlier forecast of $9.40 to $9.70 per share.
Constellation has also been in the spotlight as one of the first beverage makers to tap into Canada’s lucrative marijuana market, investing an additional $4 billion in cannabis producer Canopy Growth (WEED.TO) in August.
Other companies, including rival Molson Coors Brewing (TAP.N), have been looking at ways to introduce cannabis-related products in Canada, with an eye to the possibilities if and when a wave of legalization reaches more U.S. states.
Constellation said the investment in Canopy, which is expected to close at the end of October, would reduce profit for fiscal 2019 by $0.25 to $0.30 per share. It did not disclose further details on expenses related to the deal.
Net income attributable to the company more than doubled to $1.15 billion, or $5.87 per share, in the three months ended Aug. 31, benefiting from unrealized gains of $692 million for the increase in fair value of its current investments in Canopy Growth.
Excluding items, Constellation earned $2.87 per share, topping analysts’ estimate of $2.59 per share, according to Thomson Reuters I/B/E/S.
Net sales rose 10.1 percent to $2.30 billion, also above the estimate of $2.25 billion.
Constellation’s shares were up about 5 percent at $220.62 in afternoon trade.
Reporting by Nivedita Balu in Bengaluru; Editing by Maju Samuel and Shailesh Kuber