Constellation Brands: Cannabis investment will weigh on bottom line in 2019
Constellation Brands shares slumped more than 8 percent in trading Wednesday after the Corona beer parent warned of sagging wine sales and said its investment in Canadian pot company Canopy Growth would cut into its earnings in fiscal 2019.
The company said interest payments related to its debt-financed, $4 billion investment in Canopy would shave 25 cents over its estimated earnings per share in 2019. Constellation now expects to earn between $9.20 and $9.30 per share this year, down from an earlier estimate of $9.60 to $9.75. The company also disclosed that it wrote down the value of its investment in Canopy by $164 million.
Shares dropped even as Constellation beat expectations with third-quarter earnings of $2.37 per share and revenue of $1.97 billion.
“The wine and spirits business now expects net sales and operating income to decline low-single digits for fiscal 2019,” the company said in a press release.
Constellation initially invested in Canopy Growth in late 2017 and announced it had acquired a larger stake in the Canadian firm last August. Canada legalized pot on a national level last October. The company is said to be seeking a buyer for its U.S. wine brands.
The beverage company is one of several U.S. brands to enter the cannabis industry amid growing demand for CBD-infused products.