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Corona, Modelo beers drive Constellation beat, wines leave a stain

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FILE PHOTO: Corona beers are pictured at a BevMo! store ahead of Constellation Brands Inc company results in Pasadena, California U.S., October 4, 2016. REUTERS/Mario Anzuoni/File Photo
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By Nivedita Balu

(Reuters) - Constellation Brands Inc on Thursday reported quarterly sales and profit that beat Wall Street forecasts, benefiting from new beer launches in its Corona and Modelo brands, though wine sales struggled.

The company's new low-calorie Premier beer and Corona Familiar, launched in the United States early last year, boosted beer sales up 9.3 percent to $1.09 billion in the three months to Feb. 28 and helped it beat analysts' estimates.

Even though beer consumption drops during the winter months of December-February, Constellation said it took a bigger pie of the U.S. beer industry and was the top market share gainer for those months.

Strong demand for its beers has led the Victor, New York-based company to continue adding new brands to its Corona portfolio. This spring, it plans to launch Corona Refresca, a malt beverage available in passionfruit lime, guava lime and coconut lime flavors.

It will also introduce Modelo Chelada Limón y Sal, a traditional Mexican beer with lime and salt, to strengthen its hold on the Hispanic beer drinking market, which is its biggest.

In contrast, Constellation's wine and spirits business did not achieve the same sales momentum as beer, falling nearly 8 percent and leading the company to sell about 30 of its low-end wines to California-based E. & J. Gallo Winery for $1.7 billion on Wednesday.

"(The sale) enables us to continue to strategically focus on our powerhouse, high-margin, high growth brands," said Chief Executive Officer Bill Newlands.

Net sales from wine and spirits are expected to fall 25-30 percent and operating income to drop 30-35 percent in fiscal 2020, following the sale. This is also expected to take a big chunk out of its 2020 earnings.

The company said it expects adjusted earnings in the range of $8.50 to $8.80 per share, excluding its earnings from pot producer Canopy Growth Corp, compared with $9.34 in fiscal 2019.

"We're comfortable with the divestiture... We think Constellation has enough brands and segments that they don't have to rely solely on wines and spirits," said Altman Advisors' portfolio manager John Brick. Altman has a stake in the brewer.

Shares of the company were down marginally at $179.25 in morning trading on Thursday.

Constellation earned an adjusted profit of $1.84 per share on sales of $1.80 billion in the fourth quarter. Both beat analysts estimates handily.

(Reporting by Nivedita Balu in Bengaluru; Editing by Shinjini Ganguli)

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