06 April 2020

Surprised Investors Toast Corona Beer

Tags

What’s happening: Constellation Brands reported better-than-projected results for its fourth quarter, topping both profit and sales estimates.

What happened: The Fortune 500 company saw a strong rise in sales for its Corona Fresca and Corona Premier beers, despite the name relation with coronavirus!

Shares of Constellation Brands jumped around 4% in pre-market trading following the release of results. The generally poor market sentiment got the better of investors and the stock lost a major part of its gains through the trading day, but still closed 0.7% higher.

Although the company withdrew its fiscal 2021 outlook citing coronavirus uncertainty, investors were not wrong to be high on Constellation Brands.

  • The alcoholic beverages giant reported a decline in net income to $398.4 million, or $2.06 per share, from a profit of $1.239.5 billion, or $5.87 per share, in the same quarter last year.
  • The company announced 6% growth in quarterly sales to $1.903 billion, beating expectations of $1.84 billion.
  • Adjusted earnings came in at $2.04 per share, meaningfully ahead of the estimates of $1.64 per share.

Why it matters: Constellation Brands said there had been a spike in demand for its alcoholic beverages, which offset the decline in demand at bars and restaurants. Amid the coronavirus-related shutdowns, people stockpiled the company’s Corona and Modelo beers. Constellation Brands expects the momentum to continue into early fiscal 2021.

Management didn’t issue any financial guidance for the next fiscal year due to the coronavirus uncertainty. This caused some investor concern, especially since the announcement came a day after news of Corona shutting down production, as the Mexican government considers breweries nonessential business. Constellation Brands had been preparing for this and is already stocking up around 70 days of its products to offset expected closures.

Management maintained a positive tone during the conference call. CEO Bill Newlands reassured investors saying, “We are generally a recession-resistant industry.”

Constellation Brands has a strong financial position, with access to credit of over $2 billion. Another $850 million will also be available from the divestment of its struggling wine and spirits business.

What to watch: Constellation Brands’ brewery in Mexico remains operational, while other brewers have shut down production. Although this brewery will need to be closed soon, investors will look for news of whether the company has been able to stock enough of its beers to meet the rising demand amid people staying home.

The Markets Today

     

European stocks will be in focus today, after markets closed lower on Friday on news of a sharp decline in the region’s business activity.

Context: European stocks closed lower in the previous session, as investor concerns of a recession deepened. Fears were fueled by the massive decline in Eurozone’s business activity index in March. A horrifying non-farm payrolls report from the US didn’t help the cause.

Details: Virus-related shutdowns have led to widespread fears of a global recession. Poor economic data and news of over a million coronavirus cases globally fueled these fears, and investors resorted to buying the US dollar and government bonds.

Eurozone final composite PMI dropped sharply to 29.7 for March, from a reading of 51.6 in February. The final services PMI also declined to a record low of 26.4 in March, from February’s 52.6.

Meanwhile, the US reported a massive decline in nonfarm payrolls, with 701,000 job losses in March and its unemployment rate jumping to 4.4%.

The pan European Stoxx 600 index closed lower by 0.97%, while the FTSE 100 fell 1.18%. the French 40 was down 1.57%, while the German 30 declined by 0.47%.

Coronavirus continues to dominate overall market sentiment, with total cases reaching 1,274,900 and the death toll rising to 69,400. Spain overtook Italy in the number of coronavirus cases after reporting 131,600 cases, versus Italy’s 128,900.

What to watch: After the downbeat performance of the European stocks in the previous session, investors are hoping for a rebound today. All eyes are on the ECB to announce actions to support the economy during this crisis. Investors also await construction PMI data from Eurozone and the region’s countries.

Other Markets: US indices closed lower on Friday, with the Dow, S&P 500 and Nasdaq 100 down by 1.69%, 1.51%, and 1.53%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

News shaping
the markets today

     

What else to watch today

     

Germany’s factory orders and construction PMI, Italy’s construction PMI, France’s construction PMI, UK’s new car registrations and construction PMI, Spain's consumer confidence, Mexico’s car production and auto exports, Russia’s total vehicle sales and inflation rate, Brazil’s car production and new vehicle registrations as well as the US consumer inflation and total vehicle sales.

 

ADS Securities London Limited “ADSS” is an execution-only service provider. This material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or investment objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by ADSS that any particular investment, security, transaction or investment strategy is suitable for any specific person. To the extent that any content in this material is construed as investment research, you must note and accept that the content was not prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.  This material may contain links to third party websites, and any content, or use of your personal data by any third party websites is not the responsibility of ADSS or any member of the ADSS Group.