Dive Brief:
- Constellation Brands reported a 7% increase in organic net sales for the fiscal third quarter to $1.75 billion, RTT News reported.
- Beer sales primarily drove that growth, having climbed 16% for the quarter, while wine and spirits sales jumped 5%.
- Net income soared by 50% year over year to $406 million, or $1.98 per share.
Dive Insight:
While these earnings reports are positive indicators of continued growth, Constellation's stock price was down 15% at its December low after reaching a record high in October. It was the company's largest share price decline since the financial crisis, according to The Wall Street Journal.
But if sales and profits are soaring quarter after quarter, what is shaking investors' confidence? Threats from President-elect Donald Trump of potential mega tariffs on goods produced in Mexico, where Constellation already has operations and is currently in the midst of expanding to better serve U.S. markets. In one December post on Twitter, Trump proposed a 35% tariff on companies that move United States jobs to Mexico.
However, tariffs are generally meant for products, not companies themselves, so it's unclear whether or how Trump might carry out such an intention. Congress also doesn't seem interested in forging a trade scuffle or punishing companies so harshly that the tariffs damage the U.S. economy in other unanticipated ways.
Constellation investors may carefully monitor Trump's moves on tariffs and trade regulations regarding products manufactured in Mexico. But they shouldn't necessarily take these threats as signs of definite policy changes until the president-elect and his administration take office later this month.
One clear reason for continued confidence in Constellation is the successful selection and integration of its acquisition targets and the maintained double-digit growth of its beer portfolio. That success is thanks in large part to the Ballast Point acquisition, completed last year.