Mexican Beer Boom Sends Shares of Constellation Brands Soaring

(Bloomberg) -- The growing U.S. thirst for imported Mexican beer help send Constellation Brands Inc.'s stock on its biggest rally in three years, even as simmering border tensions threaten to undercut demand.

The company, which sells Corona, Modelo and other top Mexican brands, posted a 17 percent gain in beer sales last quarter. Constellation's Ballast Point Brewing & Spirits, which it acquired for $1 billion in 2015, also helped boost revenue.

In the wake of the growth, Constellation delivered an annual forecast that beat analysts' estimates. It also raised its quarterly dividend by about 30 percent. The bullish outlook helped allay concerns that the Trump administration will hurt Mexican importers by imposing a border tax or ripping up the North American Free Trade Agreement. Because of its heavy reliance on Mexican beer, Constellation has been seen as one of the most vulnerable companies to policy changes.

“Our beer business continues to be a powerhouse for growth,” Chief Executive Officer Rob Sands said in a statement. Constellation was the “No. 1 growth contributor to the U.S. beer industry for the year,” he said.

Constellation gained as much as 8.7 percent to $175.43 in New York, the biggest intraday gain since January 2014. The stock had been up 5.3 percent this year before Thursday.

The Victor, New York-based company expects earnings of $7.70 to $8 a share in fiscal 2018. Analysts had estimated $7.51. In the fourth quarter, profit came in at $1.48 a share, topping the projection of $1.36. Sales also were better than expected in the period. They rose to $1.63 billion, compared with a $1.59 billion estimate.

Constellation upped its quarterly dividend for Class A shares to 52 cents.

The company's wine and spirit sales aren't growing as quickly as beer. They climbed 6 percent last quarter, helped by the acquisition of the Meiomi and Prisoner brands.

To contact the reporter on this story: Jennifer Kaplan in New York at jkaplan84@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Molly Schuetz