STZ - Constellation Brands trades lower after profit guidance is lowered

Constellation Brands ( NYSE: STZ ) fell in early trading on Thursday as investors digested the company's FQ3 earnings report.

Constellation’s ( STZ ) beer business posted depletion growth of almost 6%, driven by the continued growth of Modelo Especial and strong momentum in the Modelo Chelada brands. Depletion volume selling days were flat year-over-year.

Operating margin in the beer business decreased 380 basis points during the quarter to 37.5% as benefits from net sales growth were more than offset by increased raw materials, packaging, and logistics costs due to ongoing inflationary pressures, incremental operating costs from brewery capacity expansions, and increased marketing spend as aresult of shifts in timing due to sports advertisement investments.

Depletions were down 6% for the wine/spirits business in FQ3 and operating income was off 7%.

CEO update: "Our Beer Business continued to outperform the market asthe topshare gainer for the sixth consecutive quarter. Our Wine and Spirits Business further advanced its strategy with our largest higher-end brands delivering growthsignificantly above the category segments."

Looking ahead, Constellation Brands ( STZ ) sees full-year EPS of $11.00 to $11.20 vs. $11.20 to $11.60 prior range. The company anticipates beer sales growth of 9% to 10% and wine/spirits sales growth of 0% to -2%. STZ affirmed a fiscal 2023 operating cash flow target of $2.6B to $2.8B. The outlook for free cash flow was upped by the New York-based company to $1.5B to $1.6B.

Shares of Constellation Brands ( STZ ) fell 4.00% in premarket trading to $221.91 following the earnings release.

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