Today's stock market
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Constellation Brands brews a heady quarter
Constellation Brands reported a quarter that beat expectations for both sales and profit, and investors toasted the company by bidding up shares a cool 4%. Revenue grew 3% to $2.09 billion, and comparable earnings per share jumped 40% from last year's quarter to $2.47. The consensus analyst estimate was for earnings of $2.17 per share on revenue of $2.06 billion. The company also raised guidance for full-year comparable EPS to a range of $8.25 to $8.40, while analysts had been expecting $8.18.
Constellation's beer business continues to shine in an industry that isn't growing overall. Net sales for the beer division grew 12.8% and depletion volume -- the sales from distributors to retail locations -- increased 8.1%. Operating income from the division grew a surprising 25.6%, fueling the earnings beat. Organic sales for the wine and spirits division fell 0.9%, but depletions were up 5% and operating margin improved by 40 basis points.
"We remain the leader in the high-end of the U.S. beer market, and we are reaping the benefits of our Wine and Spirits premiumization efforts," said CEO Rob Sands in the press release.
Constellation has been gaining market share in the fastest-growing segment of the U.S. beer market, and is revamping its wine and spirits business by divesting underperforming labels and acquiring new brands. With a share price that's up over 36% this year, shareholders have had their thirst for gains well satisfied.
Rhythm Pharmaceuticals debuts with a bang
Shares of biotech Rhythm Pharmaceuticals skyrocketed on their first day of trading, almost doubling during the day but eventually falling back to close up 76.5%. The Boston-based specialist in ultra-rare metabolic diseases offered 7,050,000 shares at $17 per share; the stock opened at $23 and rose during the day to close at $30. After the offering, the company has 25.7 million shares outstanding for a market capitalization of $771 million.
Rhythm is a clinical-stage biotech with no currently shipping drugs, but is working on a drug called setmelanotide to treat rare genetic disorders that cause patients to have intense and unrelenting feelings of hunger, leading to life-threatening obesity. The company is focusing on six diseases that arise from the genetic condition, and has demonstrated proof of concept in phase 2 trials for two of them, POMC deficiency obesity and LepR deficiency obesity. There are only 50 known patients in the world with POMC deficiency obesity, and the company estimates there are between 500 and 2,000 patients in the U.S. with LepR deficiency obesity.
Rhythm emphasizes that it has no intention to address the broader issue of obesity, but is only looking at treatments for these very rare genetic disorders. Given the small patient populations involved and the likelihood that the company will not be filing a new drug application until 2019 at the earliest if the drug trials are successful, the valuation after today seems generous. But the market's embrace of the stock could be an indication of an increasingly receptive environment for biotech IPOs, and investors may be seeing more of these soon.