1 Reason Constellation Stock Dropped Today

Constellation Brands (NYSE: STZ  ) released earnings on Tuesday. Let's take a closer look at the results and pin own the reason behind the wine maker's plunging stock price.

Results recap
Constellation reported adjusted EPS income of $0.38 per share, missing analyst estimates of $0.41. Earnings per share decreased from the previous quarter. Constellation also missed the revenue estimate. It recorded revenues of $673 million, a 6% increase from the same quarter last year, but a 3.3% decrease from the previous quarter. The news disappointed investors, and shares fell 3% by midday Tuesday.

However, the maker of Robert Mondavi wines raised its forecast for the fiscal year, stating more attractive financing for its recent purchase of the U.S. business of Mexican brewer Grupo Modelo (UNKNOWN: GPMCY.DL  ) should yield lower interest expense. The multibillion-dollar acquisition will crown Constellation the third largest U.S. beer company behind megabrewers Anheuser-Busch InBev (NYSE: BUD  ) and Miller Coors.

Crown jewels
Earlier this year, the U.S. Department of Justice halted the acquisition, arguing that Anheuser-Busch InBev would have too much pricing power if the deal went through. Then, just a couple of weeks later, Constellation's purchase of a Grupo Modelo brewery in Mexico satiated the DOJ, and shares of the wine maker jumped on the news.

Mostly a wine company with a smaller spirits and beer portfolio, Constellation gets popular beer brands in the deal, including Corona, Modelo Especial, Negra Modelo, and Pacifico. These four superstar beer brands each enjoyed record sales in 2012. Corona is the United States' leading import beer, and for nearly the past two decades, Modelo Especial has enjoyed double-digit growth annually. Constellation plans to grow Modelo Especial to 100 million cases, up from the roughly 40 million sold in 2012.

Foolish takeaway
Last year, Constellation stock rose a meteoric 70%. Without a doubt, Constellation will benefit from the diverse revenue streams that'll come as a result of the Grupo Modelo deal. But many investors wonder if that type of growth -- even given the company's lucrative beer deal -- is sustainable.

Constellation's stock price has experienced a lot of ups and downs recently. As an investor, does volatility make you think seriously about getting out of the market? Well, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


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