Earnings Preview: Sluggish wine sales may weigh on Constellation Brands’ Q1 results

For Constellation Brands, Inc. (NYSE: STZ), fiscal 2025 was a challenging year, with a slowdown in the wine & spirits business weighing on its financial performance. Analysts’ cautious estimates for the first quarter suggest that the company is still navigating a challenging market landscape. The brewer’s growth strategy is focused on continued investments in its fast-growing beer business and innovating the product portfolio.

The New York-headquartered company’s first-quarter earnings report is slated for release on July 1, at 4:35 pm ET. On average, analysts following the business predict adjusted earnings of $3.33 per share for the quarter, which represents a decline from Q1 FY25 when it earned $3.57 per share. The cautious earnings forecast reflects an estimated 4% decline in net revenues to $2.56 billion.

Stock Dips

Shares of the company have dropped about 27% in the past six months, as subdued financial results in the first half have weighed on investor sentiment. The stock has underperformed the broad market in recent years, and the downturn continued ahead of the upcoming earnings. While market watchers hold mixed views on STZ’s prospects, a majority of them expect it to hit the $200 mark within the next twelve months.

From Constellation Brands’ Q4 2025 Earnings Call:

“In a tough socioeconomic environment, we are taking decisive actions designed to continue to support our industry-leading Beer Business, reset our cost base, and redefine our portfolio. More specifically, first, in fiscal ‘25, despite a softer consumer demand backdrop largely driven by what we believe to be non-structural socioeconomic factors, we continue to deliver enterprise net sales growth, realize substantial comparable operating margin improvement, and achieve double-digit comparable EPS growth.”

Q4 Metrics

In the final three months of fiscal 2025, Constellation Brands’ sales rose modestly to $2.31 billion, with a 5% increase in wine and spirits sales more than offsetting weakness in the beer segment. The management expects that enterprise organic net sales will be down 2% to up 1% in fiscal 2026.

Despite the muted top-line growth, adjusted earnings increased an impressive 14% annually to $2.63 per share in the fourth quarter. On an unadjusted basis, the company reported a net loss of $375.3 million or $2.09 per share for Q4, vs. net income of $392.4 million or $2.14 per share a year earlier.

Regaining the Fizz

The Constellation leadership has warned that the new import tariffs, announced by the US and Canadian governments recently, may influence operations in fiscal 2026 and beyond, particularly due to higher costs related to raw materials like beer cans. The company is executing its strategy to deal with the unfavorable socioeconomic environment, through measures like resetting the cost base and modifying the product portfolio. Anticipating the factors affecting consumer demand to gradually stabilize and subside, the management is targeting to deliver around $9 billion in operating cash flow from fiscal ‘26 to ‘28.

After slipping to a multi-year low recently, STZ is struggling to regain strength. The stock has traded below its 52-week average since the beginning of the year. On Wednesday, the shares opened at $164.0 and traded lower in the early hours.