Constellation Brands Earnings: Beer Powers Through, Wine Repositioned
- Hardik Shah
- Jul 1
- 3 min read
TLDR
Beer holds strong: Despite macroeconomic pressure, Constellation’s beer portfolio outperformed peers and drove dollar share gains.
Wine realignment complete: Divestiture of mainstream wine brands positions the company in higher-margin, premium segments.
Cash and capital discipline: Over $300M returned to shareholders, with consistent progress on modular brewery investments and $2.7B–$2.8B operating cash flow guidance intact.
Business Overview
Constellation Brands (NYSE: STZ) is a leading beverage alcohol company operating across the U.S., Mexico, New Zealand, and Italy. Its high-end beer portfolio includes Modelo Especial, Corona Extra, and Pacifico—leading share gainers in U.S. tracked channels. In wine and spirits, Constellation is now focused on premium brands like The Prisoner Wine Co., Kim Crawford, and Casa Noble Tequila following the divestiture of mainstream wine brands. The company markets through both wholesale and DTC channels, anchored in a strategy to lead premium segments.
Constellation Brands Earnings for Q1 FY26:
Metric | Q1 FY26 | YoY Change |
Net Sales | $2.515B | -6% |
Operating Income (GAAP) | $714M | -24% |
Net Income (GAAP) | $516M | -41% |
Adjusted EBIT | $710M | -31% |
Comparable EPS | $3.22 | -10% |
Beer delivered $2.23B in net sales, down 2% as shipment volumes declined 3.3%—driven by economic softness and aluminum tariffs. Modelo, despite a ~4% depletion drop, remained the #1 U.S. beer by dollar sales.
Wine and Spirits saw a sharp 28% decline in net sales, driven by a 30.4% drop in shipments, largely due to the SVEDKA divestiture.
“While we continued to face softer consumer demand... we are pleased to continue to lead the U.S. beer industry in dollar share gains.” — Bill Newlands, CEO
Forward Guidance
Management reaffirmed FY26 comparable EPS guidance of $12.60–$12.90, despite updating GAAP EPS to $12.07–$12.37 due to accounting charges. Key FY26 targets include:
Beer net sales growth: 0%–3%
Beer operating income growth: 0%–2%
Wine & Spirits organic net sales decline: 17%–20%
Operating cash flow: $2.7B–$2.8B
Free cash flow: $1.5B–$1.6B
Operational Performance
Constellation’s Beer segment remained the strongest engine, with Pacifico up 13% and Corona Sunbrew among top gainers. However, depletions fell 2.6% due to fewer social occasions among Hispanic consumers—a key demographic for Constellation.
“We’re seeing less social occasions... 75% of Hispanic consumers are going to restaurants less.” — Bill Newlands, CEO
In contrast, the Wine & Spirits segment underwent a full reset. The June closure of the wine divestiture aligns the portfolio with premium trends, even though operating margins dipped from 15.3% to -2.1%.
Market Insights
Consumer behavior remains in flux:
Hispanic demand softened, impacted by inflation and immigration concerns.
Non-Hispanic consumers showed value-seeking behavior but minimal trade-down from Constellation’s premium products.
The younger 21–25 age group, critical to beer demand, remains well-penetrated by Constellation, defying concerns over secular declines in alcohol consumption.
“Our percentage of business with 21–25 year olds is twice the industry average.” — Bill Newlands
Despite weather-related sales disruptions (e.g., cold Memorial Day), brand health for Modelo, Corona, and Pacifico remains strong.
Strategic Initiatives
Constellation doubled down on:
SKU Efficiency: Maintaining a ~60 SKU count, far fewer than peers, improving shelf-space and distribution margins.
Premium Focus: Post-divestiture, remaining Wine & Spirits brands outperformed the high-end wine segment.
Innovation: Corona Non-Alc, Chelada multipacks, and new 7oz/8oz formats improve accessibility and relevance.
Restructuring Savings: $200M+ targeted by FY28; $55M expected in FY26 alone.
Capital Allocation
Share Buybacks: $381M repurchased YTD
Dividend: Maintained at $1.02/share
Debt: Net leverage remains around 3.0x
CapEx: ~$1.2B projected in FY26, with $1B focused on Mexican brewery expansions
“Our cash flow generation enabled us to remain at our ~3.0x net leverage and ~30% dividend payout targets.” — Garth Hankinson, CFO
The Bottom Line
Constellation Brands is navigating a complex demand environment with resilience, led by its powerhouse beer brands and sharpened premium wine strategy. With strong brand equity, disciplined capital allocation, and structural changes completed, the company is positioning for long-term margin expansion and cash flow growth. Investors should watch for consumer behavior recovery, Pacifico’s expansion, and how restructuring savings bolster margins in H2 FY26 and beyond.
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