Constellation Brands, Inc.'s (STZ) first foray into cannabis is helping to take its shares higher.
Shares of the Victor, N.Y.-based beer, wine, and spirits distributor jumped after besting analyst expectations on its second quarter earnings, trading roughly 4.9% higher at 9:50 a.m., or around $221.34 per share.
The company posted a beat on top and bottom lines for earnings, reporting revenue of $2.30 billion and $2.87 in earnings per share. Earnings per share significantly outpaced analyst estimates of $2.60 per share, according to Thomson Reuters.
The result supports the estimates of bullish market sentiment heading into the release, as five analysts publishing research this week had issued buy ratings in anticipation of earnings, according to FactSet data.
"The double-digit EPS growth we delivered in the second quarter is top-tier for consumer product companies," Constellation's CEO Rob Sands said in a statement. "Constellation remains the high-end leader and the most significant growth contributor in the U.S. beer market, and we're seeing strong growth trends for the super-premium plus segment of our wine portfolio."
He noted that Corona was the most significant brand contribution to earnings.
Margin Moves Shares
Constellation cited record margin in the beer category as a significant tailwind, helping bolster the share price.
"The beer business achieved record operating margin of 41.3%, an increase of 10 basis points, as benefits from favorable pricing and operational performance," the company reported.
The significant margin improvement is a major boon, as other beverage companies have reported that transportation and aluminum prices had impacted earnings negatively. While Constellation acknowledged these impacts, it explained that its higher margins on its products were able to overcome these challenges.
The company even managed to outpace its Tony Romo-headlined advertising spend, which it noted as another impact on margins.
Cannabis Foray Helps Surge
The company made a big splash into cannabis in August, spending about $4 billion for a stake in Canadian cannabis leader Canopy Growth Corporation (CGC) .
"Our $4 billion investment in Canopy Growth provides us with a strong foothold in the emerging global cannabis market, which could be one of the most significant growth opportunities of the next decade."
Shares of Canopy, up 0.7% before the bell, are rising with Constellation's tide. Surging from roughly $30 per share to nearly $50 this morning, the firm's stock marks a handsome return for Constellation on their bold investment.
TheStreet founder and Action Alerts Portfolio manager Jim Cramer will be sitting down with Canopy Growth Corporation CEO Bruce Linton and Constellation Brands COO and President Bill Newlands on October 13 at Jim Cramer's Boot Camp for Investors.
The positive results should be a happy subject for discussion for the trio come next Saturday.
First, the company will look to explain its record quarter at 10:30 a.m. ET in its analyst presentation.