by Ian Harvey
January 14, 2019
Constellation Brands, Inc. Class A (NYSE: STZ)
Constellation Brands, Inc. Class A (NYSE: STZ) stock fell 12.4% on January 9 as it lowered its earnings forecast for fiscal 2019 to reflect the impact of additional interest expenses associated with the financing of its investment in leading cannabis company Canopy Growth (CGC) and the dismal performance of its wine and spirits business..
But “Earnings Predictions Members”, taking a put option, realized 189% potential profit.
PATIENCE PAYS OFF!
YOU NEED TO BE IN TO PROFIT!
The Details Presented Previously……..
The Details Presented Previously……..
The beer and spirits specialist, Constellation Brands, Inc. Class A (NYSE:
STZ), will report earnings before the market opens. The consensus
earnings estimate is $2.04 per share on revenue of $1.91 billion; but the
Whisper number is a little higher at $2.08 per share. Consensus estimates are
for year-over-year earnings growth of 2.00% with revenue decreasing by 3.48%.
Constellation Brands has fallen sharply in recent months after hitting an all-time high earlier in the year. The stock is currently trading just above its 52-week low after making a small recovery over the last two weeks. Constellation has struggled to generate momentum over the past year, with shares now down more than 28% after strong December selling. Last quarter the company posted better than expected numbers on both the top and bottom line, but the results were not enough to prevent a selloff as the overall market turned lower.
Profit gains are slowing for a few reasons…..
Overall earnings estimates have been revised lower since the company's last earnings release.
Option trade to consider: Buy the STZ JAN 18 2019 160.000 PUT at approximately $3.30.
The Earnings Report…..
Sales rose a modest 2.4% from year-ago levels, but adjusted earnings
were down slightly. CEO Julien Mininberg pointed to currency headwinds and a
slowdown in Chinese e-commerce activity as partial causes of the mixed results,
and said the need to raise prices due to tariffs could hurt the company's
short-term shipment volumes. Even though Helen of Troy boosted earnings
guidance for the full fiscal year, a cut to the upper end of its expected sales
range was enough to worry shareholders.
The Result So Far………
Constellation Brands’ EPS of $2.37 excluding one-time items in the third quarter of fiscal 2019 easily exceeded analysts’ consensus expectation of $2.06. The company’s fiscal 2019 third-quarter adjusted EPS rose 17.9% on a YoY (year-over-year) basis.
The growth in the company’s adjusted EPS was driven by lower taxes and the strong performance of its beer business. Constellation Brands’ adjusted effective tax rate was 14.1% in the quarter compared to 19% in the third quarter of fiscal 2018.
Taking into account one-time items, the company’s reported EPS fell ~36% to $1.56 in the third quarter of fiscal 2019. Constellation Brands’ reported EPS were adversely affected by a loss of $164 million associated with the decline in the fair value of its investment in Canopy Growth (CGC).
Constellation Brands lowered its fiscal 2019 adjusted EPS guidance to the range of $9.20–$9.30 compared to its previous guidance range of $9.60–$9.75. Analysts expect its fiscal 2019 adjusted EPS to be $9.43.
On a reported basis, Constellation Brands now expects its EPS to be in the range of $12.95–$13.05 compared to its previous guidance range of $14.10–$14.25 in fiscal 2019.
So, for “Earnings Predictions Members”, who managed to execute this trade recommended by Stock Options Made Easy; potential profits of 189% were available at the time.
Entering the option trade at a cost of $3.30 or less on Monday; and the price of the option reaching $9.55 on Wednesday; a profit of 189% was made. Therefore, one options contract would provide a profit of $625.00.
A NICE FINISH TO THE WEEK!
Reasons to Buy Again…..
Constellation management is proven and they are not afraid to make bold moves. This is evident from their $4 billion investment in Canopy Growth (NYSE: CGC) that competes in the cannabis sector. Clearly they are looking far out into the future. To that point, other experts agree as Goldman Sachs and Guggenheim upgraded the stock.
Rob Sands, who is the departing Constellation CEO, announced that he and his brother bought 1.1 million shares. So this is a huge bullish statement that the company is well on track. Otherwise, why risk $150 million?
Technically, STZ has dropped badly but has found a potential area of support. Almost two years ago it broke out from these levels to start a 44% rally. It is now far below those highs but therein lies the opportunity.
These pivot zones usually create congestion because both bulls and bears will want to fight over them thereby creating the support. This combined with the fact from the departing CEO, creates the potential of a bottom.
Most analysts have at least a “buy” rating on it even though it is trading much lower than their lowest of price targets.
Therefore, NEW Trade to consider……..
** OPTION TRADE: Buy STZ APR 18 2019 165.000 CALL at approximately $6.80. Sell price is left to your own judgment.
AS ALWAYS THE DECISION IS YOURS!
As you would have by now realized, some of our trades are based on earnings predictions. This is not to say all trades recommended to members follow this pattern, which is obvious that it doesn’t apply in this case; but during earnings season this strategy of predicting earnings has been very profitable.
Sometimes it is our approach to predict whether a company will beat or miss estimates, whether the stock will appreciate or depreciate as a result and what strategies investors and traders can use – such as found with the “Earnings Predictions Program”. This type of prediction is based on thorough investigation and fundamentally based research, and the results have been very exceptional.
An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!
Strategies to Consider……
When To Exit A Trade Based On Earnings?.....Read Article
"Trading Capital Management" is a key component of your trading strategy. The strategy, on which we base our trades to achieve maximum profit, and to minimize loss, is contingent on using an equal amount of money for each trade.……continue reading this article……
Our proven track record says it all!!
Members of Stock Options Made Easy are provided with an extensive reason as to which direction a stock will move after earnings, followed up by a recommended options trade.
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