At Constellation Brands, Inc. (STZ) , the glass is not just full — it's overflowing.
Shares of the company are rising 5.6% on the open after the firm beat second quarter expectations on both its top and bottom lines. Management is also betting the company's record growth can continue as it raised guidance on full-year earnings per share.
The company now expects full-year EPS of $9.60 to $9.75, which marks a modest increase from its prior guidance of $9.40 to $9.70. It also outpaces a consensus outlook of $9.30.
"This is the only packaged goods company that is raising estimates across the board," said Jim Cramer on CNBC's Squawk on the Street this morning. "Beer is back."
CEO Rob Sands is crediting growth trends for the "super-premium plus segment" of the company's wine portfolio, as well as his foothold in the emerging cannabis market alongside Canopy Growth Corporation (CGC) , as catalysts for the raised guidance.
The company's profitable wine segment, which generated $671 million in net sales for the quarter ended August, include brand names like Robert Mondavi, Clos du Bois, Kim Crawford, Meiomi, Mark West, Black Box, Ruffino and The Prisoner.
Additionally, the company's core brands — Corona and the new "Corona Premier" — are helping the company slate continued growth.
"The beer business was the number one share gainer in the U.S. beer industry driven by accelerating Corona brand family dollar trends and Modelo Especial's position as the number one growth brand in the market," said the company in a statement.
Buybacks and Beer
Buybacks are common in the beer and wine industry, often to reward customers whose patronage a bartender might value.
Constellation Brands is showing the same hospitality to shareholders as it moves to reward them even as multi-billion dollar cannabis investments tighten cash flow.
Evercore ISI Head of Beverage Research Robert Ottenstein noted that buybacks contributed to earnings per share by reducing share count.
The company repurchased 1.9 million shares of common stock in the past quarter for $404 million is slating an additional purchase of 2.4 million shares for $504 million.
The purchases and the dividend payment the company is charting comes despite the announcement of an additional $4 billion in investment headed to Canopy Growth Corporation (CGC) by the end of the month.
"Our share repurchases to date of more than $500 million reflect confidence in our ability to drive double digit EPS growth for our core business well into the future," CFO David Klein explained. "Our strong cash generation capabilities allow financial flexibility to make strategic investments in long-term growth opportunities that have the potential for significant upside."
Shareholders will certainly be comforted by the company's cash flow position given this level of flexibility.
Cannabis a Short-term Drag
Evercore's Ottenstein did point out that one of the company's recent moves, namely its investment in Canopy Growth, will create a short term drag on earnings.
"Interest from Canopy [is] expected to be $0.25-$0.30 drag, with STZ still evaluating potential equity earnings and related items," he wrote in an update on the earnings release this morning. He did, however, maintain his overall outlook on the company, with a $255 price target and an outperform rating for the spirits supplier.
Traders will look ahead to the company's earnings presentation at 10:30 a.m. for more insight into Canopy's first quarter with Constellation, as well as more details on the company's estimate-crushing quarter.