Constellation Brands Inc. shares fell 7% on Thursday, leading to a decline in the S & P 500 after the distributor of Corona beer suffered a large loss in its second fiscal quarter as it was impacted by charges investment in a Canadian cannabis company.  Victor, New York's Constellation Brands
STZ, -5.28% ,
The company, which also owns Modelo Beer and Robert Mondavi wines, has given its share of the capital losses and related activities due to its approximately $ 4 billion investment in the Canadian Canopy Growth Corp.
CGC, + 2.1
WEED, + 2.69%
amounted to $ 484.4 million. In addition, cost savings of $ 46 million were recognized.
Net loss increased to $ 525.2 million or $ 2.52 per share for the quarter ended August 31, after a gain of $ 1.149 billion or $ 5.41 per share for the same period last year. Excluding these costs, the company had earnings per share of $ 2.72, ahead of the $ 2.63 FactSet consensus.
Sales increased 2% to $ 2.444 billion, in line with the FactSet consensus.
Constellation Brands has made no secret of its frustration with its cannabis investments, which drove Canopy to the top of the market in terms of market capitalization. The company acquired its 35% stake at the end of last year at a time when the cannabis sector was on the rise.
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But by summer, disappointed by the growing losses of Smith Falls, Ontario-based firm William Newlands, chief executive, expressed impatience at a conference call with analysts.
Read: The remaining CEO of Canopy Growth talks about rousing the pot company and looking for its replacement.
"While we are pleased with our investment in cannabis space and its long-term potential, we were not pleased with Canopy's recent year-end results," Newlands told analysts. "However, we continue to aggressively support Canopy in a long-term strategy to capture markets and key factors while paving the way for profitability."
This displeasure led the company to oust Bruce Linton as a fellow campaigner -CEO of Canopy, a move that shocked the industry when it was announced in July. Linton was widely regarded as the face of legal cannabis, as he was the leader of the largest company in space, frequently appearing in the media and conducting interviews.
In May, Constellation Brands appointed Mike Lee, a former Senior Vice President and Chief Financial Officer, as Interim CFO of Canopy, to overhaul the company's strategy.
At the telephone conference with analysts on Thursday, Newlands softened its tone at Canopy.
"Overall, we are pleased with the progress of the Canopy team and the results of recent months," he told analysts in a FactSet log. The team develops a range of CBD products and marketing plans and secures the resources to bring them to the United States.
Newlands welcomed Parliament's recent vote in favor of a law designed to protect banks serving the cannabis industry from federal enforcement, and said it is looking forward to cannabis 2.0 in Canada, the introduction of derivatives in December is expected.
The CEO said the company is now betting on another relatively new trend, the harsh Seltzer or an alcoholic fizzy drink. Constellation plans to introduce a corona seltzer based on its popularity with Hispanics and other drinkers.
"The refreshing properties of Seltzer are a perfect match for corona refreshment DNA," he said. "We believe that seltzer will stay here and therefore accelerate the volume shift to the lower-to-upper category where we are market share leaders."
The company plans four variants of the drink, including tropical wine, mango, cherry and blackberry lime. The brand will only have 90 calories with zero carbs and zero sugar, he said.
Cannabis Watch: For the full coverage of MarketWatch on cannabis companies
Read: Cannabis companies have a terrible summer as scandals rise and inventories sink billions of $ 1.527 billion in the second Quarter. However, sales of wine and spirits declined from $ 772.0 million to $ 703.6 million, while shipments dropped from $ 16.0 million to 14.4 million 9-liter box equivalents.
Wine and spirits performance continues to be impacted by transition activity with traders who, after completing the pending transaction with E.J. Gallo, "the company said. E.J. Gallo has agreed to buy about 30 of Constellation's $ 1.7 billion worth of wine and spirits brands.
The company has revised its guidance and now expects earnings per share of 55 cents to 75 cents and adjusted earnings per share of $ 9.00 to $ 9.20 last year $ 9.28. The forecast assumes that the wine and spirits agreement will be finalized by the end of the third quarter, along with a separate agreement to divest the Canadian Black Velvet whiskey to Heaven Hill Brands for $ 266 million.
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"Modelo's relentless strength and resulting cash generation give Constellation the flexibility to invest in innovation, adjoining industries and marketing," he wrote in a statement to clients reiterating his buy recommendation for the stock.
Most of its competitors face the opposite: falling volumes and a fixed-income profit and loss account force a tightening of the investment belt.
Bonnie Herzog, an analyst at Wells Fargo, also a bull with an above-average valuation of the stock, said the company exceeded their expectations thanks to strong beer sales.
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"Overall, we are confident that the STZ occupies a leading position in beer / wine and ultimately Hard Selters", she wrote in a note to the customers. "The stock seemed initially under pressure in terms of the decline in earnings per share, but that was well understood during this" year of savings, "so we would be buyers because of the weakness."
Constellation shares in the US fell 9% last 12 months, while the S & P 500
SPX, + 0.67%
has fallen 2.3% and the Dow Jones Industrial Average
DJIA, + 0.34%
fell by 3.9%.