Leading wine distributor Constellation Brands Inc.’s (STZ) GAAP net income soared to $49.1 million in the first quarter of fiscal 2011 from $6.5 million in the prior year quarter. Excluding special items, adjusted earnings per share came in at 38 cents, surpassing both the Zacks Consensus Estimate of 35 cents and the year-ago earnings of 33 cents per share.

Bolstered by the strong quarterly performance, Constellation Brands lifted its earnings guidance for fiscal 2011 to a range between $1.63 and $1.78 per share, compared to the earlier prediction of $1.53 to $1.68 per share. The revised guidance remains in line with the Zacks Consensus Estimate of $1.71 per share, which moved up a penny over the past 2 months.

Meanwhile, quarterly net sales declined marginally by 0.5% to $787.5 million from $791.6 million in the year-ago period, primarily due to divestment of the value and cider spirits business in the U.K. and favorable foreign currency translations. In terms of geographic regions, North American net sales grew 1% year-over-year to $589.9 million, primarily due to management initiatives to streamline distributor network in the U.S., while Australia and Europe fell 5% to $197.6 million.

Constellation Brands’ operating income rose 13.7% year-over-year to $96.3 million, while operating margin expanded 150 basis points (bps) to 12.2%. The growth was primarily attributable to improved gross margin and lower restructuring expenses, partially offset by increased selling, general and administrative expenses.

Constellation Brands ended the quarter with cash and cash equivalents of $20.9 million, compared to $16.8 million in the year-ago period. The company’s long-term debt-to-capitalization ratio also reduced to 62.8% from 65.7% in the prior year period. During the reported quarter, Constellation generated $59.7 million of cash from operations and raised $194.6 million from notes payable. The company also deployed $300 million towards an accelerated share buyback program and $25.6 million towards capital expenditure.

Looking ahead, Constellation Brands expects to generate $460 million to $530 million of cash from operations in fiscal 2011 and deploy $110 million to $130 million towards capital expenditure. Accordingly, the company anticipates free cash flow in the fiscal to range between $350 million and $400 million.
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