Stock Rises
Second-quarter sales declined 15.5% year-over-year to $2.65 billion, reflecting lower sales in both the Wine & Spirits and Beer businesses. Adjusted earnings dropped to $3.63 per share in Q2 from $4.32 per share in the prior-year quarter. Revenues and earnings came in above expectations. On a reported basis, net income was $466 million or $2.65 per share, compared to a loss of $1.20 billion or $6.59 per share in the second quarter of fiscal 2025.
Outlook
For the full fiscal year, the management expects enterprise organic net sales to decline 4-6% year-over-year, which is in line with its earlier guidance. A few months ago, the company had lowered FY26 guidance, citing macroeconomic uncertainties. The weak sales forecast reflects an estimated 2-4% drop in full-year beer sales and a 17-20% decline in wine & spirits sales. Recently, margins have come under pressure from higher aluminum tariffs since the company imports a large portion of canned beer from Mexico, including popular brands like Corona and Modelo. The trend is expected to continue in the near term.
From Constellation Brands’ Q2 2026 Earnings Call:
“Our loyalty is up with Hispanic consumers for Modelo. You know, a lot of people ask the question about Gen Z often. We have twice the share of Gen Z as part of our overall mix versus the industry average. We’re sitting in a good spot as the consumer turns around and gets more comfortable with where they are. At the moment, there’s just a tremendous amount of concern about socioeconomic issues, really across the board. In our view, that’s the significant thing that’s been challenging both for us and for the category in general.”
Consumer Spending
Constellation Brands also reaffirmed its recently updated full-year targets for operating cash flow in the range of $2.5 billion to $2.6 billion and free cash flow between $1.3 billion and $1.4 billion. The company said that the majority of its Hispanic and non-Hispanic customers remain worried about the socioeconomic environment as well as their personal finances. Subdued consumer spending, particularly on discretionary items, is affecting sales of Constellation’s high-end brands.
On Tuesday, Constellation Brands’ stock opened sharply below its 52-week average price of $187.42. The shares have lost as much as 18% in the past six months.