Constellation Brands (NYSE:STZ) won a lot of attention for being the first major company to cozy up to cannabis companies when it acquired a 38% stake in Canopy Growth (NYSE:CGC), but its legacy spirits, wine, and beer business took center stage today following the release of its fiscal third-quarter results and guidance for the coming quarters.

The company's top-line results were slightly better than industry watchers' forecasts. However, the bottom-line results were mixed, and its outlook for full-year earnings was lowered. Here's what you need to know about this company's results.

Young people toasting each other with cups of beer.

IMAGE SOURCE: GETTY IMAGES.

Constellation Brands: The raw numbers

Metric Fiscal Q3 2019 Fiscal Q3 2018 Year-Over-Year Change
Sales $1.97 billion $1.8 billion 9%
Operating income $557 million $490 million 14%
Net income $303 million $493 million (36%)
GAAP EPS  $1.56 $2.45 (36%)
Adjusted EPS $2.37 $2.01 18%

Data source: Constellation Brands.

What happened with Constellation Brands?

Constellation Brands' big equity investment in Canopy Growth will take some time to pay off, so its results last quarter reflect its legacy beer, wine, and spirits business. The company shipped 14.1% more beer last quarter than the same quarter one year ago, but its wine and spirits shipments were flat.

As a result, beer sales rose 16% to $1.2 billion, but wine and spirits sales clocked in at just $763 million, slightly better than $759 million in the same quarter last year. 

In the beer business, operating margin declined 0.6% because of higher transportation costs, and marketing expenses increased to about 11% of sales from 10% of sales one year ago. 

In the wine and spirits business, growth in sales of wines at price points north of $11 per bottle was offset by declining demand for brands sold below that price point, resulting in a negative 3.2% depletion rate. Operating margin, however, improved 0.7% because of lower selling, general, and administrative spending. 

What management had to say

CEO Rob Sands highlighted strength in the beer business, saying:

The results delivered by our beer business mark the highlight of our third quarter performance. The Modelo and Corona brand families continue to be on fire, fueled by strong velocities, excellent distribution gains and highly incremental innovation. Our leadership in the high-end U.S. beer industry positioned us to be the most significant growth contributor at retail during the quarter.

As for the lackluster wine and spirits performance, President and COO Bill Newlands said:

Our focus on innovation is driving incremental growth for our beverage alcohol portfolio. We recently introduced Meiomi Sparkling, Crafters Union canned wine and Mi CAMPO tequila, which tap into fast growing sectors of the wine and spirits market...Our innovation pipeline will continue to fuel growth for our business in the years ahead.

Looking forward

Constellation Brands lowered its full fiscal year profit guidance following the quarterly performance. It now expects to deliver EPS of between $12.95 and $13.05 in fiscal 2019, down from its prior guidance for between $14.10 and $14.25.

The decrease in guidance reflects Constellation Brands' lower-than-anticipated wine and spirits sales, and the company's management said in its quarterly earnings conference call that it's exploring strategic options for that business. Offsetting some of the concern surrounding that business, however, is management's comment that Canopy Growth's goal is to reach a 1 billion Canadian dollar sales run rate within the next 18 months, and that it plans to return $4.5 billion to shareholders through share buybacks and dividends within the next three years. 

Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.