It has been about a month since the last earnings report for Constellation Brands (STZ Quick QuoteSTZ - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Constellation Brands due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Constellation Brands' Q1 Earnings & Sales Miss Estimates

Constellation Brands 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.

Net sales declined 5.5% year over year to $2.52 billion and missed the Zacks Consensus Estimate of $2.57 billion.

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.

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.

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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a flat trend in estimates review.

VGM Scores

At this time, Constellation Brands has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a score of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Constellation Brands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.