Canopy Growth’s Large Losses Bog Down the Corona Maker’s Quarterly Earnings
Constellation Brands (NYSE: STZ) reported its fiscal Q2 2020 financial results this morning beating Wall Street’s expectations on revenue and adjusted earnings per share (EPS). However, Canopy Growth’s (TSX: WEED) (NYSE: CGC) millions in losses continue to weigh heavily on the alcohol giant.
Constellation posted a loss per share of $2.77 and adjusted EPS of $2.72 on sales of $2.344 billion as the Corona make saw its beer sales jump 7.4% to $1.64 billion. The company’s wine and spirits sales decreased by 9% to $703.6 million. The consensus estimates among Wall Street analysts had Constellation reporting adjusted EPS of $2.60 on revenue of $2.337 billion.
Management at Constellation has adjusted its full-year adjusted EPS target from $8.65-$8.95 to $9.00-$9.20, well above Wall Street’s consensus target of $8.33. The company also upped its target on operating cash flow from $2.1 billion to roughly $2.2 billion.
”The winning streak for our beer business continues with Modelo Especial generating the most growth in the entire U.S. beer category, while Corona remains the #1 high-end beer brand family. This powerful combination gives us confidence in high-single-digit beer growth for years to come. Our Wine & Spirits innovation pipeline is primed to launch impactful product introductions, as we head into the key selling season this fall,” said Constellation Brands CEO Bill Newlands.
Constellation booked a $54.7 million loss on its $4 billion Canopy Growth investment. Shares of Canopy have lost over 50% of its value in 2019 as a result of weaker than expected company earnings. In Q1 2019, Constellation recognized a $54.5 million loss on its Canopy investment. Constellation has taken steps to rectify the financial situation at Canopy by taking control of the leading Canadian licensed producer (LP) this summer after firing then CEO Bruce Linton.
The company recognized a total quarterly loss of $484.4 million due to Canopy’s equity losses and related activities. On a comparable basis, Constellation lost $54.7 million in Q2.
Constellation also realized a fair value decrease of $839 million on its Canopy Growth position during the second quarter.
Shares of Constellation Brands are currently trading at $195.34 per share, down 5.54% on the day.
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