Constellation Brands (STZ) stock fell in premarket trading on Wednesday despite the Corona and Modelo beer maker beating Wall Street’s earnings expectations.
Although sales grew for the quarter, investors weighed whether the strength reflected retailers rebuilding inventory rather than an actual pickup in consumer demand.
Beer sales grew 5% in the quarter to $2.47 billion. However, the company said it shipped “slightly more cases” of beer to distributors looking to rebuild inventory that were depleted or sold through to retail locations, suggesting consumer demand may still be sluggish.
In the second quarter, Constellation Brands reported $2.63 billion in net sales, above analysts’ expectations of $2.54 billion, according to S&P Global Market Intelligence consensus data. Adjusted earnings per share of $3.74 also topped estimates of $3.55.
“We’re significantly outperforming the industry, and we are seeing marketing-driven green shoots across the board,” said Constellation Brands CEO Nicholas Fink, who took over the top role earlier this year. “Finally, our inventory levels are healthy. We have spent much of the first half rebuilding distributor inventory levels, and while there’s always going to be month-to-month variability, September depletions are trending in the right direction.”
Constellation Brands said that off-premise sales, which include beverages sold at grocery and convenience stores, during the World Cup “came in below industry expectations,” while on-premise sales at restaurants and bars grew.
Sales of Constellation Brands’ bestselling beers, Modelo Especial and Corona Extra, declined, though this was partially offset by growth in smaller brands such as Pacifico, Victoria, and Modelo Chelada.
Sales in the Wine and Spirits category increased 17%, driven by a 15.4% increase in shipment volumes.
The company reaffirmed its full-year adjusted earnings per share forecast of $11.20-$11.90. It continues to see beer sales down 1% to up 1%, wine sales down 1% to up 1%, and enterprise sales down 1% to up 1%.
“If the positive September trends that we saw continue, we would expect to land at the high end of that range,” Fink said.
Constellation Brands also announced that it acquired ready-to-drink cocktail brand SpikedAde for $75 million up front and payments of up to $278 million over the next five years based on the future performance of the brand.
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