Constellation Brands (STZ) Down 7.8% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Constellation Brands (STZ). Shares have lost about 7.8% 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 its most recent earnings report in order to get a better handle on the important drivers.

Constellation Brands' Q2 Earnings & Sales Beat Estimates

Constellation Brands reported second-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, due to tough socioeconomic factors.

Comparable earnings per share (EPS) of $3.63 dropped 16% year over year in the fiscal second quarter but surpassed the Zacks Consensus Estimate of $3.37. On a reported basis, the company’s EPS was $2.65 against a loss per share of $6.59 reported in the year-earlier quarter.

Net sales declined 15% year over year to $2.48 billion but came above the Zacks Consensus Estimate of $2.46 billion. Organic net sales dipped 8% year over year.

Constellation Brands' Q2 Performance Details

Constellation Brands' sales for the beer business fell 7% year over year to $2.35 billion, backed by a decline of 8.7% in shipment volumes. The shipment decline resulted from socioeconomic headwinds, which led to soft consumer demand as well as distributor inventory rebalancing. Depletions dipped 2.7%, mainly due to declines of just more than 4%, just above 7% and almost 3% in Modelo Especial, Corona Extra and the Modelo Chelada brands, respectively. This was partly offset by 13% depletion growth for the Pacifico and 19% for Victoria.

Sales in the wine and spirits segment plunged 65% year over year to $136 million in the fiscal second quarter. Sales were hurt by a 76.4% decline in shipment volumes, reflecting the impacts of the SVEDKA divestiture and the 2025 Wine divestitures, as well as changes in financial and volume with respect to distributor contractual obligations. However, depletions grew nearly 2%.

Peeking Into Constellation Brands’ Margins

Constellation Brands' comparable operating income was $886.2 million, down from $1,019.1 million recorded in the prior-year quarter. The decline is attributed to the soft operating income in the beer, wine and spirits businesses.

Operating income for the beer segment fell 12% year over year to $951.6 million. The beer segment’s operating margin contracted 200 basis points to 40.6%, owing to higher COGS, including fixed cost absorption from reduced volumes and aluminum tariffs, and higher marketing, as a percentage of net sales, somewhat offset by favorable pricing.

The wine and spirits segment reported an operating loss of $19.8 million against an operating income of $70.5 million in the year-ago quarter. The segment’s operating margin contracted significantly due to the unfavorable impacts of the SVEDKA Divestiture and the 2025 Wine Divestitures, and changes in financial and volume-related distributor contractual obligations.

Constellation Brands' Financial Position Seems Strong

As of Aug 31, 2025, Constellation Brands’ cash and cash equivalents were $72 million, long-term debt (excluding current maturities) was $9.8 billion and total shareholders’ equity (excluding non-controlling interest) was $7.5 billion. The company generated an operating cash flow of $1.5 billion and an adjusted free cash flow of $1.1 billion in the six months of fiscal 2026.

The company’s strong cash flow generation over the first six months of fiscal 2026 enabled it to consistently execute disciplined capital allocation priorities. The company returned nearly $604 million to shareholders through share repurchases.

Constellation Brands forecasts an operating cash flow of $2.5-$2.6 billion for fiscal 2026. It expects a free cash flow of $1.3-$1.4 billion. Constellation Brands plans to incur capital expenditures of $1.2 billion in fiscal 2026, including $1 billion expected to be spent on the planned expansion of Mexico beer operations.

Constellation Brands’ FY26 Expectations

Management now projects enterprise organic net sales decrease of 4-6% compared with a decline of 2% and an increase of 1% for fiscal 2026 anticipated earlier. Beer segment net sales are likely to decline 2-4% against the previous guidance of 0-3% growth. However, organic net sales for the wine and spirits segment are still expected to decline 17-20%.

Constellation Brands anticipates enterprise operating income, on a reported basis, to increase 667-687% for fiscal 2026 (compared with 742-760% estimated earlier), while the comparable operating income is expected to decline 9-11% compared with a 1-3% drop anticipated earlier. The company expects operating income to fall 7-9% for the beer segment and decline 97-100% for the wine and spirits segment. Corporate expenses are expected to be $225 million for fiscal 2026.

The company anticipates a comparable EPS guidance of $11.30-$11.60 for fiscal 2026. Constellation Brands expects the reported fiscal 2026 EPS to be $9.86-$10.16 compared with $12.07-$12.37 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?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Constellation Brands has a average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for value investors.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Constellation Brands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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This article originally published on Zacks Investment Research (zacks.com).

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