Oct. 07--Constellation Brands continued its strong year, helped by a second straight quarter of double-digit growth in beer sales. Constellation Brands' beer division, headquartered in Chicago, is going gangbusters with its Mexican beers, like Corona Extra and Modelo Especial.
By the numbers: Constellation Brands reported $302 million in net income for the fiscal second quarter that ended Aug. 31. That comes out to $1.49 in diluted earnings per share, which represents a 52 percent increase from the same period a year ago.
Constellation reported $1.73 billion in sales for the second quarter, up 8 percent from the same period a year ago.
Quarterly beer sales increased 14 percent from a year ago, while wine and spirits sales were essentially flat.
The "why": The big story here is the continued rapid growth of Constellation's Mexican beers.
CEO Rob Sands called the company's beer business "extremely strong" in the Wednesday morning earnings call with analysts, noting it posted its 22nd consecutive quarter of volume share gains.
Sands pointed to the newly designed Corona Extra can as one of the drivers of growth for that brand. The cans represented more than 40 percent of Corona's volume growth, he said.
Increasingly, consumers are reaching for Mexican imports and craft beers instead of domestic mainstream beers, industry analysts say. Constellation Brands is well-positioned to capitalize. In 2013, the company acquired all U.S. rights for its Mexican brews. And this week, the company is unveiling its new line of craft beer.
Beer sales for the third quarter are expected to be affected by a beer recall that occurred last year, which resulted in the reversal of approximately 2 million case shipments and a $37 million reduction in sales, the company reported.
Even with that "difficult" comparison looming in the third quarter, beer sales on the year are expected to grow 10 percent, Chief Financial Officer David Klein said on the earnings call.
Constellation is expanding its brewery in Nava, Mexico, which is expected to be completed by June. At that point, the company is expected to produce all its own beer.
Other highlights from the quarter: The company reported $508 million in free cash flow, up from $360 million a year ago.
Constellation Brands' board of directors also declared a quarterly cash dividend for its stockholders.
Quote you on that: "We're more focused on what do we think is good for our brands, and what will work and not work," Sands said, when asked on the earnings call whether there's a plan to increase the pricing gap between Constellation's Mexican beers and domestic premium beers. "We're sort of marching to our own beat instead of worrying about the competition, overall."
Outlook: The company increased its fiscal 2016 outlook and now expects an adjusted per-share earnings of between $5.00 and $5.20.
gtrotter@tribpub.com
