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Constellation Brands beats on earnings as beer sales jump

Yahoo Finance Live anchors discuss first-quarter earnings for Constellation Brands.

Video Transcript

JULIE HYMAN: All right, another company reporting earnings this morning is Constellation Brands. And those shares are down 3% after the company's first quarter numbers beat estimates. The beer business performed well in particular. Sales up 21%. Beer shipments up 17% year over year here. The company came out and didn't change anything with its full-year forecast as a result of this, by the way, but the company overall saying it's, you know, doing pretty well. One of the interesting side notes for its full year is it's continuing to evaluate the future potential equity earnings impact from the Canopy equity investment. Remember, that's the investment in Canopy Growth.

BRIAN SOZZI: I have my shruggy face on this. Like--

- Oh, my goodness.

BRIAN SOZZI: I think-- Bill Newlands, CEO of Constellation Brands, friend of the show, he'll be on tomorrow morning. We'll talk more about this quarter. I think he would have liked to see more meat on the operating margin line. Margins were under pressure in the beer business and wine business. And I talked to Bill a couple of weeks ago on the floor of the New York Stock Exchange. He said, look, inflation is still high. And he does not see peak inflation happening any time. So I can't say that I'm surprised by the margin pressure, but still I think when you're seeing these type of sales declines in a beer business that is roaring back because people are going out, you would have liked to see more gains there in profits.

- You know, and in a time like this, too, some of the cash flow targets are amazingly important to look at for companies and how they're able to navigate their own liquidity, making sure that, and similar to our conversation just a moment ago, that they do have on their balance sheets enough cash to continue to on the back end support their operations, but also show investors that they are in a very well liquid position. Their operating cash flow target right now, $2.6 to $2.8 billion. Free cash flow projection of $1.3 to $1.4 billion. So I think that gets back to this broader mindset of where investors might be looking for companies that have a solid cash position, too.

JULIE HYMAN: And who was just talking about a solid cash position? Julian Emanuel from Evercore.

BRIAN SOZZI: That's why he's here.

JULIE HYMAN: That was one of the things that he was highlighting. Just one more thing to mention, not specific to Constellation, but just in general in the booze business, the conventional wisdom is that this is a business that can perform well even in a recession, that people drink no matter what. Now, maybe they'll trade down in what they are buying perhaps. We'll see if that's how it plays out. But that traditionally has been the thinking.

- So a bottle of Oly instead of a premium Corona in a recession.

JULIE HYMAN: That would be quite a trade down, wouldn't it?

- Or have less of their items go on allocation. Because, I mean, that's what some of the distributors have had to, unfortunately, see within their customer relationships. If you have a bottle that is extremely high in demand, then that goes on allocation, and you can't you can't sell that high margin bottle, then what at that point? So all right, so we've added shruggy face, bummer-ish to the technical terminology--

BRIAN SOZZI: Techno--

- --that we use here on the desk as well. I think dippity-dip is on there, too.