Constellation Brands, Inc. (STZ Quick QuoteSTZ - Free Report) reported fourth-quarter fiscal 2026 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. The company’s sales and earnings declined year over year on weak consumer demand trends. 

The Beer business continues to outperform the category in dollar share gains in Circana U.S. tracked channels in the fiscal year, surpassing the overall beer category by roughly two percentage points in year-over-year dollar sales, generating depletion and net sales growth in the fourth quarter of 0.6% and more than 1%, respectively. The Wine & Spirits business remaining portfolio outpaced the total wine category in both dollar sales and volumes in Circana U.S. tracked channels in fiscal 2026, delivering above 8% depletion growth in the reported quarter.

Comparable earnings per share (EPS) of $1.90 dropped 28% year over year in the fiscal fourth quarter but surpassed the Zacks Consensus Estimate of $1.74. On a reported basis, the company’s EPS was $1.16 against a loss of $2.09 reported in the year-earlier quarter.

Net sales declined 11% year over year to $1.920 billion but came above the Zacks Consensus Estimate of $1.896 billion. Organic net sales were flat year over year.

STZ’s Q4 Performance Details

Constellation Brands' sales for the beer business jumped nearly 1% year over year to $1.73 billion, backed by a rise of 1.1% in shipment volumes and favorable pricing, partly offset by unfavorable mix. Depletions rose 0.6% as declines for Modelo Especial of just under 1% and Corona Extra of about 6% were more than offset by increases from Pacifico, Victoria and the Modelo Chelada brands of nearly 21%, 17%, and 5%, respectively.

Sales in the wine and spirits segment plunged 58% year over year to $194.2 million in the fiscal fourth quarter. The metric was hurt by a 72.9% decline in shipment volumes, reflecting the effects of the Wine & Spirits divestitures, changes in distributor contractual obligations and pricing efforts taken on certain brands.

The Zacks Consensus Estimate for the company's beer, and wine and spirits segments is currently pegged at $1.71 billion and $195 million, respectively.

Peeking Into Constellation Brands’ Margins

STZ's comparable operating income came in at $508 million, down 9% year over year. Operating income for the beer segment slipped 8% year over year to $572.5 million. The beer segment’s operating margin contracted 340 basis points (bps) to 33.2%, as favorability in net sales was more than offset by higher cost of goods sold owing to unfavorable fixed cost absorption, elevated depreciation and aluminum tariffs.

The wine and spirits segment reported an operating income of $2.6 million, which fell sharply from $99.7 million in the year-ago quarter. The segment’s operating margin contracted to 1.3% from 21.7%, mainly owing to the unfavorable impacts from sales, somewhat offset by favorable marketing and other selling, general and administrative expenses.

STZ’s Financial Position Seems Strong

As of Feb. 28, 2026, Constellation Brands’ cash and cash equivalents were $102.4 million, long-term debt (excluding current maturities) was $9.7 billion and total shareholders’ equity (excluding non-controlling interest) was $8.1 billion. The company generated an operating cash flow of $2.7 billion and an adjusted free cash flow of $1.8 billion in fiscal 2026.

STZ’s board announced a quarterly dividend of $1.03 per share for Class A shares on April 8, 2026, representing a hike of 1%. The dividend is payable on May 14 to its shareholders of record as of April 29, 2026.

The company’s strong cash flow generation in fiscal 2026 enabled it to consistently execute disciplined capital allocation priorities. The company returned more than $1.6 billion to its shareholders, including share repurchases of more than $900 million.

Constellation Brands still forecasts an operating cash flow of $2.4-$2.5 billion for fiscal 2027. It expects free cash flow of $1.6-$1.7 billion. STZ plans to incur capital expenditures of $800 million in fiscal 2027.

Constellation Brands’ FY27 Expectations

Looking forward, management is optimistic about the momentum seen in the reported quarter across its beer and wine & spirits businesses. It expects the operating landscape to remain dynamic based on the evolving socioeconomic environment and limited near-term visibility. Consequently, management has updated its fiscal 2027 outlook and withdrawn its earlier-issued outlook for fiscal 2028.

Enterprise and wine & spirits growth (decline) net sales assumptions for fiscal 2027 exclude $142 million for the March 1, 2025, to June 1, 2025 period. These are no longer part of the year-over-year results following the 2025 Wine Divestitures.

STZ projects enterprise organic net sales growth (decline) of (1)% - 1%, beer net sales growth (decline) of (1)% - 1%, and wine & spirits business organic net sales growth (decline) of (1)% - 1%. Enterprise operating margin on a reported and comparable basis is projected to be 32-33%, with beer operating margin of 37-38% and wine & spirits operating margin of 5-6%.

The company anticipates comparable EPS of $11.20-$11.90 for fiscal 2027 compared with $11.82 earned in fiscal 2026. STZ expects reported fiscal 2027 EPS to be $11.10-$11.80 compared with $9.61 seen in fiscal 2026. Constellation Brands anticipates a reported and comparable tax rate of 20% for fiscal 2027.

Shares of this Zacks Rank #3 (Hold) company have gained 11.6% in the past six months compared with the industry’s growth of 12.9%.

Three Stocks Looking Good 

Freshpet, Inc. (FRPT Quick QuoteFRPT - Free Report) , which is a pet food company, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

The Zacks Consensus Estimate for Freshpet’s current financial-year sales indicates growth of 9.3% from the prior-year level. FRPT delivered a trailing four-quarter earnings surprise of 50%, on average.

United Natural Foods (UNFI Quick QuoteUNFI - Free Report) , which is the leading distributor of natural, organic and specialty food and non-food products, currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for United Natural Foods’ current financial-year earnings is expected to rise 254.9% from the year-ago reported figure. UNFI delivered a trailing four-quarter earnings surprise of 51.9%, on average.

B&G Foods (BGS Quick QuoteBGS - Free Report) , which has a diversified portfolio of brands, including B&G, B&M, Cream of Wheat, Las Palmas and more, currently carries a Zacks Rank of 2. BGS delivered a negative average earnings surprise of 19.5% in the trailing four quarters. 

The Zacks Consensus Estimate for BGS’ current financial-year earnings indicates growth of 5.9% from the year-ago number.