Thursday morning was mixed on Wall Street, with cross-currents in various sectors of the market causing stock indexes to move in different directions. As of 11:35 a.m. EDT, the Dow Jones Industrial Average (DJINDICES: ^DJI) was up 144 points to 26,362. The S&P 500 (SNPINDEX: ^GSPC) was unchanged at 2,874, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) dropped 17 points to 7,879.
Among high-profile stocks, Tesla (NASDAQ: TSLA) moved sharply lower after the company announced its production and delivery numbers for the first quarter of 2019, falling short of what most of the electric-car maker's shareholders had hoped to see. Meanwhile, Constellation Brands (NYSE: STZ) took another step in its efforts to align its business more closely to shifting consumer tastes, selling off some of its best-known wine brands in favor of concentrating on more promising opportunities.
Tesla hits the brakes
Shares of Tesla were down 9% after the electric vehicle specialist reported its latest metrics for the first quarter. Tesla said that it produced 77,100 vehicles during the period, including 62,950 Model 3 cars and 14,150 in combined units of the Model S and Model X variants. However, deliveries amounted to about 63,000 vehicles, consisting of 50,900 Model 3s and 12,100 of the other two models. Although that was more than double what Tesla delivered during the first quarter of 2018, it was down by more than 30% compared to deliveries in the period that ended three months ago.
Tesla pointed to ongoing challenges it faced throughout much of the quarter. A big increase in deliveries to Europe and China created new logistical obstacles for Tesla to overcome, and the company revealed that it had delivered only about half of the quarter's volume with just 10 days to go in the period. Despite best efforts, Tesla wasn't able to get all those vehicles to customers, saying that it had about 10,600 units still in transit globally as of March 31.
As a result, Tesla warned that its net income will see a negative impact. Numerous adjustments to the pricing of Tesla vehicles will also contribute to weaker numbers than many had hoped to see.
Yet two bigger questions remained unanswered. First, it's unclear how Tesla will address the situation over the longer run. With just a single factory in the Bay Area, the electric car maker sees a high likelihood of production outpacing deliveries again in the current quarter. In addition, with Model S and X deliveries having fallen substantially, there's a real concern that the cheaper Model 3 could cannibalize sales of higher-price offerings, hitting Tesla's long-term profit expectations.
Constellation picks pot over wine
Shares of Constellation Brands were higher by 4% following the alcoholic beverage company's release of fiscal fourth-quarter results. Constellation's earnings came in better than expected, reflecting strong demand for its Corona and Modelo beer brands.
In a bigger strategic shift, though, Constellation said that it would sell off some of its weaker-performing businesses. In particular, the company specified 30 different brands of wines and spirits that it will sell to privately held E&J Gallo Winery for $1.7 billion. The sale won't completely divest Constellation's portfolio of wine brands as many had previously expected, but it will help improve the quality of its remaining holdings as the company focuses on its higher-end, higher-margin products.
Constellation's beer business had dramatically outperformed its wine and spirits offerings, and the company has also recognized the secular threat that the legalization of marijuana represents to the alcohol industry more broadly. Many of Constellation's competitors have struggled to come close to matching the performance of Modelo and Corona. Meanwhile, Constellation's stake in Canopy Growth has already been extremely profitable from an investment standpoint, and the beer maker remains optimistic about the prospects for cannabis. Investors agree, and they like the refinement they see in Constellation's emphasis going forward.
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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.