Shares of Constellation Brands Inc (NYSE:STZ) shot up Thursday in premarket trade after the wine, liquor and beer company which is making a high-profile play to eventually produce CBD-infused drinks, posted fiscal second-quarter earnings that handily beat Wall Street estimates on surging Corona beer and wine revenue.
The company also raised its guidance while disclosing its Canopy Growth Corp (NYSE:CGC, TSX:WEED) investment has generated more than $1 billion in gains as marijuana stocks rocket on investor demand. The initial investment in Canopy has produced a $639 million unrealized gain in the second quarter and $1.3 billion since the investment in November 2017.
"Our $4 billion investment in Canopy Growth provides us with a strong foothold in the emerging global cannabis market, which could be one of the most significant growth opportunities of the next decade," Constellation Brands CEO Rob Sands said in a statement.
READ: Constellation Brands ups stake in Canopy Growth, invests an additional US$4bn
Constellation stock shot up 4.4% to $220 in premarket trade, while Canopy Growth played catch-up and rose 1.05%.
Constellation’s latest $4 billion investment in Canadian cannabis company Canopy Growth Corp brings its stake in the company to 38%. The company held a 9.9% stake in October 2017 with the option for future investments.
Earnings beat
The Victor, New York-based maker of Corona beer reported fiscal second quarter 2019 earnings of $2.87 per share on revenue of $2.5 billion. The consensus earnings estimate was $2.58 per share on revenue of $2.2 billion. Revenue grew 9.9% on a year-over-year basis.
The company said it expects fiscal 2019 earnings of $9.60 to $9.75 per share. The company's previous guidance was earnings of $9.40 to $9.70 per share and the current consensus earnings estimate is $9.26 per share for the year ending February 28, 2019.
“Constellation remains the high-end leader and the most significant growth contributor in the US beer market, and we're seeing strong growth trends for the super-premium plus segment of our wine portfolio," said Sands.
The CEO noted that Corona beer was the most significant brand contributor to earnings and provided a "significant" tailwind.
"The beer business achieved record operating margin of 41.3%, an increase of 10 basis points, as benefits from favorable pricing and operational performance," kicked in the company said.
Contact Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive --
-- (Updates with cannabis investment gains, CEO quotes, Canopy Growth share price) --