Constellation Brands CEO Defends Stock, Tells Cramer Sell-Off Was 'Total Overreaction'

Alcohol company Constellation Brands, Inc. STZ saw its stock plunge more than 12 percent Wednesday in reaction to the company's guidance revision due to weakness in several business lines and a loss of value in its Canopy Growth Corp CGC stake.

What Happened

Constellation Brands' value drop Wednesday is nothing short of a "total overreaction," CEO Rob Sands told CNBC's Jim Cramer during his daily "Mad Money" show Wednesday evening.

The company was forced to revise its earnings guidance for 2019 to the downside due to exceptions for poor performance within the wine business.

The CEO said most of the disappointment will come from the low-end wine category of bottles under $11. The weakness in the low-end category is industrywide and is an area management identified months ago for strategic alternatives, he said. 

"The business, the growth, even the margins are 100-percent intact except for some disappointment in the low end of the wine business."

Why It's Important

Despite a poorer-than-anticipated outlook, Constellation Brands remains on track and committed to returning $4.5 billion in cash to investors over the next three years through dividends and stock buybacks, said incoming CEO Bill Newlands. The company remains in a "great position" and is backed by the strength of its beer segment, which helps sustain a strong cash-generation business, he said. 

What's Next

Constellation Brands' balance sheet is a source of concern among some Street analysts, but Newlands told Cramer the company can proceed with its financial obligations to Canopy Growth, return cash to shareholders and improve its debt-to-EBITDA ratio from four times to its goal of 3.5 times.

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