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Corona, Modelo beers power Constellation's profit beat

Bottles of the beer, Modelo, a brand of Constellation Brands Inc., sit on a supermarket shelf in Los Angeles, California April 1, 2015. REUTERS/Lucy Nicholson

By Sruthi Ramakrishnan

(Reuters) - Constellation Brands Inc's (STZ.N) quarterly profit blew past Street estimates as sales of beers under its Corona and Modelo brands rose and a strong dollar helped cut production costs.

Shares of the company, which also raised its full-year adjusted profit forecast for the second time, rose 3 percent to a record high of $135.30 on Wednesday.

Constellation's net beer sales rose 14 percent to $1.02 billion in the second quarter ended Aug. 31, accounting for about 59 percent of net sales.

The company is benefiting from strong demand from the rising Hispanic population in the United States who prefer the company's beer brands such as Modelo Especial and from other consumers switching to premium Mexican beers.

Constellation said in June it will invest more than $2 billion in its Mexican operations to expand its bottling and brewery plant in Coahuila.

About 15 percent of the company's beer costs are denominated in Mexican pesos, which would have benefited Constellation due to the strong dollar, RBC Capital Markets analyst Nik Modi told Reuters.

The global beer market is set for a shake-up, with Anheuser-Busch InBev (ABI.BR), the world's largest brewer, making a $104 billion bid for rival brewer SABMiller Plc (SAB.L).

Analyst Modi said "the price environment in the U.S. should be that much stronger" if AB InBev raises prices to delever any huge debt it is likely to take on for the deal.

Constellation has a supply agreement with AB InBev until June 2016, by which time it plans to increase its beer production capacity.

Constellation on Wednesday said its new craft beer would be available from next week at several Chicago restaurants, expanding in a fast-growing business.

Net sales of wine and spirits, which includes Robert Mondavi wine and Svedka Vodka, fell 0.3 percent to $713.9 million, hurt by a strong dollar.

Net income attributable to the company rose 54.4 percent to $302.4 million, or $1.49 per share, in the quarter.

Excluding items, it earned $1.56 per share, handily beating analysts average estimate of $1.32, according to Thomson Reuters I/B/E/S.

Net sales rose 8.1 percent to $1.73 billion, in line with analysts' estimates.

Constellation raised its adjusted earnings forecast to $5-$5.20 per share from $4.80-$5.00 for the year ending February.

The company's shares were up 1.3 percent at $133.05 on the New York Stock Exchange.


(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Sriraj Kalluvila)