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Constellation Brands' Stock Slips 1% on Q1 Earnings & Sales Miss
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Key Takeaways
STZ reported a 1Q26 EPS of $3.22 and sales of $2.52B, both missing estimates.
Beer sales fell 2% as Modelo and Corona volumes dropped; Pacifico saw double-digit growth.
Wine and spirits sales plunged 28% due to the SVEDKA divestiture and weak mainstream demand.
Constellation Brands, Inc. (STZ - Free Report) reported first-quarter fiscal 2026 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. The company’s sales and earnings declined year over year. The results were mainly hurt by weak consumer demand trends, driven by non-structural socioeconomic factors.
Comparable earnings per share (EPS) of $3.22 dropped 10% year over year in the fiscal first quarter and missed the Zacks Consensus Estimate of $3.38. On a reported basis, the company’s EPS of $2.90 declined 39% year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Net sales declined 5.5% year over year to $2.52 billion and missed the Zacks Consensus Estimate of $2.57 billion.
Constellation Brands’ stock declined 1.2% in the after-market trading session following the earnings release. The decline in share price can be attributed to the company’s dismal first-quarter fiscal 2026 top and bottom-line performances, and a bleak outlook. Shares of this Zacks Rank #3 (Hold) company have lost 8.3% in the past three months compared with the industry’s decline of 2%.
Image Source: Zacks Investment Research
Looking at STZ’s Q1 Performance Details
Constellation Brands' sales for the beer business fell 2% year over year to $2.23 billion, backed by a decline of 3.3% in the shipment volume. The shipment decline resulted from socioeconomic headwinds, which led to soft consumer demand. Depletion volumes dipped 2.6% due to declines of 4%, just above 7% and 3% in Modelo Especial, Corona Extra and the Modelo Chelada brands, respectively. This was partly offset by more than 13% depletion growth for the Pacifico brand.
Sales in the wine and spirits segment declined 28% year over year to $280.5 million in the fiscal first quarter. Sales were hurt by a 30.4% decline in shipment volumes and an 8.1% dip in depletions. Organic sales for the wine and spirits segment were down 21% in the quarter, led by a 13.3% improvement in shipment volume. The soft shipment volume was primarily driven by the SVEDKA divestiture and a strategic adjustment in shipment timing to better reflect ongoing weak consumer demand, particularly in the mainstream price segments of the U.S. wholesale market.
Constellation Brands Inc Price, Consensus and EPS Surprise
STZ's comparable operating income was $810 million, down 11% from the prior-year quarter. The decline is attributed to the soft operating income in the beer, and wine and spirits businesses.
Operating income for the beer segment fell 5% year over year to $873.4 million. The beer segment’s operating margin contracted 150 basis points to 39.1%, owing to higher COGS due to increased tariffs for aluminum, marketing investments and other SG&A. Additionally, lower fixed cost absorption benefits led to the margin contraction.
The wine and spirits segment reported an operating loss of $6 million compared with an operating income of $59.7 million in the year-ago quarter. The segment’s operating margin contracted significantly due to lower contractual distributor payments and unfavorable variances linked to changes in volume-based contractual obligations, partially offset by marketing and other SG&A efficiencies.
STZ’s Financial Position Seems Strong
As of May 31, 2025, Constellation Brands’ cash and cash equivalents were $73.9 million, long-term debt (excluding current maturities) was $9.8 billion, and total shareholders’ equity (excluding non-controlling interest) was $7.3 billion. The company generated an operating cash flow of $637.2 million and an adjusted free cash flow of $444.4 million for the first quarter of fiscal 2026.
STZ’s board announced a quarterly dividend of $1.02 per share for Class A shares on July 1, 2025. The dividend is payable on Aug. 14 to its shareholders of record as of July 30.
The company’s strong cash flow generation in the fiscal first quarter allowed it to consistently execute disciplined capital allocation priorities. The company returned nearly $381 million to shareholders through share repurchases.
Constellation Brands forecasts an operating cash flow of $2.7-$2.8 billion for fiscal 2026. It expects a free cash flow of $1.5-$1.6 billion. STZ plans to incur a capital expenditure of $1.2 billion in fiscal 2026, including $1 billion expected to be spent on the planned Mexico beer operations expansion activities.
Constellation Brands’ FY26 Expectations
STZ reiterated its outlook for fiscal 2026. Management anticipates enterprise organic net sales between a decline of 2% and an increase of 1% for fiscal 2026, with 0-3% net sales growth for the beer segment. However, organic net sales for the wine and spirits segment are expected to decline 17-20%.
Constellation Brands anticipates enterprise operating income, on a reported basis, to increase 742-760% for fiscal 2026 (compared with 765-783% estimated earlier), while the comparable operating income is still expected to decline 3-1%. The company expects operating income to improve 0-2% for the beer segment and decline 97-100% for the wine and spirits segment. Corporate expenses are expected to be $265 million for fiscal 2026.
The company anticipates the comparable EPS guidance of $12.60-$12.90 for fiscal 2026. STZ expects the reported fiscal 2026 EPS to be $12.07-$12.37 (compared with $12.33-$12.63 mentioned earlier). It recorded a comparable EPS of $13.78 and a reported loss per share of 45 cents in fiscal 2025.
Constellation Brands predicts interest expenses of $385 million for fiscal 2026. It anticipates a reported tax rate of 15% and a comparable tax rate of 18% for fiscal 2026. The company expects shares outstanding to be 176 million at the end of fiscal 2026, inclusive of share repurchases.
Stocks to Consider
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Ambev (ABEV - Free Report) , MGP Ingredients (MGPI - Free Report) and The Coca-Cola Company (KO - Free Report) .
Ambev is engaged in producing, distributing and selling beer, carbonated soft drinks and other non-alcoholic and non-carbonated products in many countries across the Americas. ABEV has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The consensus estimate for Ambev’s current financial year’s sales indicates growth of 3% from the year-ago reported figure. Meanwhile, the consensus mark for EPS reflects flat year-over-year results. TAP delivered a trailing four-quarter negative earnings surprise of 4.2%, on average.
MGP Ingredients produces and markets ingredients and distillery products to the packaged goods industry. MGPI currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and earnings indicates declines of 24.1% and 56.2%, respectively, from the year-ago reported figures. MGPI delivered a trailing four-quarter earnings surprise of 8.5%, on average.
Coca-Cola is a leading global beverage giant, with a portfolio of more than 4,700 beverage products (and more than 500 brands), spanning from sodas (or sparkling beverages) to energy drinks. It currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Coca-Cola’s current financial-year sales and earnings indicates growth of 2.5% and 3.1%, respectively, from the year-earlier actuals. KO delivered a trailing four-quarter earnings surprise of 4.9%, on average.
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Constellation Brands' Stock Slips 1% on Q1 Earnings & Sales Miss
Key Takeaways
Constellation Brands, Inc. (STZ - Free Report) reported first-quarter fiscal 2026 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. The company’s sales and earnings declined year over year. The results were mainly hurt by weak consumer demand trends, driven by non-structural socioeconomic factors.
Comparable earnings per share (EPS) of $3.22 dropped 10% year over year in the fiscal first quarter and missed the Zacks Consensus Estimate of $3.38. On a reported basis, the company’s EPS of $2.90 declined 39% year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Net sales declined 5.5% year over year to $2.52 billion and missed the Zacks Consensus Estimate of $2.57 billion.
Constellation Brands’ stock declined 1.2% in the after-market trading session following the earnings release. The decline in share price can be attributed to the company’s dismal first-quarter fiscal 2026 top and bottom-line performances, and a bleak outlook. Shares of this Zacks Rank #3 (Hold) company have lost 8.3% in the past three months compared with the industry’s decline of 2%.
Image Source: Zacks Investment Research
Looking at STZ’s Q1 Performance Details
Constellation Brands' sales for the beer business fell 2% year over year to $2.23 billion, backed by a decline of 3.3% in the shipment volume. The shipment decline resulted from socioeconomic headwinds, which led to soft consumer demand. Depletion volumes dipped 2.6% due to declines of 4%, just above 7% and 3% in Modelo Especial, Corona Extra and the Modelo Chelada brands, respectively. This was partly offset by more than 13% depletion growth for the Pacifico brand.
Sales in the wine and spirits segment declined 28% year over year to $280.5 million in the fiscal first quarter. Sales were hurt by a 30.4% decline in shipment volumes and an 8.1% dip in depletions. Organic sales for the wine and spirits segment were down 21% in the quarter, led by a 13.3% improvement in shipment volume. The soft shipment volume was primarily driven by the SVEDKA divestiture and a strategic adjustment in shipment timing to better reflect ongoing weak consumer demand, particularly in the mainstream price segments of the U.S. wholesale market.
Constellation Brands Inc Price, Consensus and EPS Surprise
Constellation Brands Inc price-consensus-eps-surprise-chart | Constellation Brands Inc Quote
Peeking Into Constellation Brands’ Margins
STZ's comparable operating income was $810 million, down 11% from the prior-year quarter. The decline is attributed to the soft operating income in the beer, and wine and spirits businesses.
Operating income for the beer segment fell 5% year over year to $873.4 million. The beer segment’s operating margin contracted 150 basis points to 39.1%, owing to higher COGS due to increased tariffs for aluminum, marketing investments and other SG&A. Additionally, lower fixed cost absorption benefits led to the margin contraction.
The wine and spirits segment reported an operating loss of $6 million compared with an operating income of $59.7 million in the year-ago quarter. The segment’s operating margin contracted significantly due to lower contractual distributor payments and unfavorable variances linked to changes in volume-based contractual obligations, partially offset by marketing and other SG&A efficiencies.
STZ’s Financial Position Seems Strong
As of May 31, 2025, Constellation Brands’ cash and cash equivalents were $73.9 million, long-term debt (excluding current maturities) was $9.8 billion, and total shareholders’ equity (excluding non-controlling interest) was $7.3 billion. The company generated an operating cash flow of $637.2 million and an adjusted free cash flow of $444.4 million for the first quarter of fiscal 2026.
STZ’s board announced a quarterly dividend of $1.02 per share for Class A shares on July 1, 2025. The dividend is payable on Aug. 14 to its shareholders of record as of July 30.
The company’s strong cash flow generation in the fiscal first quarter allowed it to consistently execute disciplined capital allocation priorities. The company returned nearly $381 million to shareholders through share repurchases.
Constellation Brands forecasts an operating cash flow of $2.7-$2.8 billion for fiscal 2026. It expects a free cash flow of $1.5-$1.6 billion. STZ plans to incur a capital expenditure of $1.2 billion in fiscal 2026, including $1 billion expected to be spent on the planned Mexico beer operations expansion activities.
Constellation Brands’ FY26 Expectations
STZ reiterated its outlook for fiscal 2026. Management anticipates enterprise organic net sales between a decline of 2% and an increase of 1% for fiscal 2026, with 0-3% net sales growth for the beer segment. However, organic net sales for the wine and spirits segment are expected to decline 17-20%.
Constellation Brands anticipates enterprise operating income, on a reported basis, to increase 742-760% for fiscal 2026 (compared with 765-783% estimated earlier), while the comparable operating income is still expected to decline 3-1%. The company expects operating income to improve 0-2% for the beer segment and decline 97-100% for the wine and spirits segment. Corporate expenses are expected to be $265 million for fiscal 2026.
The company anticipates the comparable EPS guidance of $12.60-$12.90 for fiscal 2026. STZ expects the reported fiscal 2026 EPS to be $12.07-$12.37 (compared with $12.33-$12.63 mentioned earlier). It recorded a comparable EPS of $13.78 and a reported loss per share of 45 cents in fiscal 2025.
Constellation Brands predicts interest expenses of $385 million for fiscal 2026. It anticipates a reported tax rate of 15% and a comparable tax rate of 18% for fiscal 2026. The company expects shares outstanding to be 176 million at the end of fiscal 2026, inclusive of share repurchases.
Stocks to Consider
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Ambev (ABEV - Free Report) , MGP Ingredients (MGPI - Free Report) and The Coca-Cola Company (KO - Free Report) .
Ambev is engaged in producing, distributing and selling beer, carbonated soft drinks and other non-alcoholic and non-carbonated products in many countries across the Americas. ABEV has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The consensus estimate for Ambev’s current financial year’s sales indicates growth of 3% from the year-ago reported figure. Meanwhile, the consensus mark for EPS reflects flat year-over-year results. TAP delivered a trailing four-quarter negative earnings surprise of 4.2%, on average.
MGP Ingredients produces and markets ingredients and distillery products to the packaged goods industry. MGPI currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and earnings indicates declines of 24.1% and 56.2%, respectively, from the year-ago reported figures. MGPI delivered a trailing four-quarter earnings surprise of 8.5%, on average.
Coca-Cola is a leading global beverage giant, with a portfolio of more than 4,700 beverage products (and more than 500 brands), spanning from sodas (or sparkling beverages) to energy drinks. It currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Coca-Cola’s current financial-year sales and earnings indicates growth of 2.5% and 3.1%, respectively, from the year-earlier actuals. KO delivered a trailing four-quarter earnings surprise of 4.9%, on average.