Constellation Brands Inc. shares fell almost 12% on Jan. 9 after the company reported earnings for its fiscal third quarter of 2019 that beat analysts' expectations, but slashed its full-year fiscal 2019 guidance on higher expected interest from its investment in Canadian cannabis producer Canopy Growth Corp. and a net sales decline in its wine and spirits business.
Comparable, or non-GAAP, EPS rose 18% year over year to $2.37, beating the mean analyst consensus estimate for normalized EPS of $2.08, according to S&P Global Market Intelligence. The comparable figure excludes a $163.9 million decline in the value of the company's stake in Canopy Growth during the quarter, executives said.
The Corona brewer lowered its full-year fiscal 2019 guidance to include additional interest expense from financing the investment in Canopy Growth. Constellation Brands now expects reported basis EPS of $12.95 to $13.05 and EPS on a comparable basis of $9.20 to $9.30. The company previously expected reported EPS between $14.10 and $14.25 and comparable EPS between $9.60 and $9.75.
Interest expenses for the full fiscal year will rise to a range of $380 million to $390 million from previous expectations of $335 million to $345 million, Constellation Brands said. The additional $55 million debt is from the debt-financed Canopy Growth deal, which closed Nov. 1, 2018.
Constellation Brands also said it expects full-year net sales and operating income declines in the low single digits in wines and spirits. The company previously forecast growth between 2% and 4% in both figures.
Net income attributable to the company came in at $461.7 million on a comparable, non-GAAP basis, a 14% increase over the year-ago period. Analysts expected $403.7 million in net income excluding exceptions, according to S&P Global Market Intelligence.
Net sales rose 9% to $1.97 billion for the quarter, up from $1.80 billion in the same quarter of 2017.
Constellation Brands' board of directors on Jan. 8 declared a cash dividend of 74 cents per share of class A common stock and 67 cents per share of class B common stock to shareholders of record at the close of business on Feb. 12. The dividend is payable Feb. 26, the company said.
Shares in Constellation Brands dropped 11.9% in premarket trading on Jan. 9 to $151.81 per share.