Constellation Brands Posts Q3 Earnings Beat, Soft Wine & Spirits Sales

Constellation Brands, Inc. STZ reported third-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.

Comparable earnings per share (EPS) of $3.06 dropped 6% year over year in the fiscal third quarter but surpassed the Zacks Consensus Estimate of $2.65. On a reported basis, the company’s EPS was $2.88 versus $3.39 reported in the year-earlier quarter.

Net sales declined 10% year over year to $2.22 billion but came above the Zacks Consensus Estimate of $2.18 billion. Organic net sales dipped 2% year over year.

The Beer business continues to outpace the broader industry, surpassing total beverage alcohol by almost half a percentage point and the beer category by approximately one percentage point on a year-over-year basis. This outperformance is evident across both dollar and volume sales in Circana U.S. tracked channels.

Meanwhile, the Wine and Spirits business has also outpaced the corresponding higher-end wine segment in dollar and volume sales performance in Circana U.S. tracked channels.

STZ’s Q3 Performance Details

Constellation Brands' sales for the beer business dipped 1% year over year to $2.01 billion, backed by a decline of 2.2% in shipment volumes, partly offset by favorable pricing. Depletions fell 3% as declines for Modelo Especial of about 4%, Corona Extra of 9% and the Modelo Chelada brands of roughly 2% were somewhat offset by solid growth from Pacifico and Victoria of more than 15% and 13%, respectively.

Sales in the wine and spirits segment plunged 51% year over year to $213.1 million in the fiscal third quarter. The metric was hurt by a 70.6% decline in shipment volumes, reflecting the effects of the SVEDKA divestiture and the 2025 Wine divestitures, as well as strategic pricing efforts on select brands and changes in distributor contractual obligations. The company’s portfolio delivered flat U.S. depletions and surpassed the corresponding higher-end wine segment in dollar and volume sales performance in Circana U.S. tracked channels.

Peeking Into Constellation Brands’ Margins

STZ's comparable loss was $46.9 million versus $9.2 million recorded in the prior-year quarter. The decline was due to the soft operating income in the beer, wine and spirits businesses.

Operating income for the beer segment slipped 1% year over year to $763.5 million. The beer segment’s operating margin increased 10 basis points to 38%, as favorable pricing and reduced depreciation were somewhat offset by higher COGS from aluminum tariffs and adverse fixed cost absorption from soft volumes.

The wine and spirits segment reported an operating income of $33.7 million, which fell 65% from the year-ago quarter. The segment’s operating margin contracted to 15.8% from 22.1% due to the unfavorable impacts of the SVEDKA Divestiture and the 2025 Wine Divestitures, adverse fixed cost absorption, strategic pricing, as well as changes in distributor contractual obligations. This was partly offset by favorability in marketing and other SG&A expenses.

STZ’s Financial Position

As of Nov. 30, 2025, Constellation Brands’ cash and cash equivalents were $152.4 million, long-term debt (excluding current maturities) was $10.3 billion and total shareholders’ equity (excluding non-controlling interest) was $7.7 billion. The company generated an operating cash flow of $2.1 billion and an adjusted free cash flow of $1.5 billion in the nine months of fiscal 2026.

STZ’s board announced a quarterly dividend of $1.02 per share for Class A shares on Feb. 12, 2026. The dividend is payable on Nov. 13 to its shareholders of record as of Jan. 29, 2026.

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

Constellation Brands still forecasts an operating cash flow of $2.5-$2.6 billion for fiscal 2026. It expects adjusted free cash flow of $1.3-$1.4 billion. STZ plans to incur capital expenditures of $1.2 billion in fiscal 2026, comprising nearly $1 billion targeted for Mexico beer operations.

Constellation Brands’ FY26 Expectations

Management continues to project an enterprise organic net sales decrease of 4-6% for fiscal 2026. Beer segment net sales are likely to decline 2-4%. 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 657-677% for fiscal 2026 (compared with 667-687% estimated earlier), while the comparable operating income is still expected to decline 9-11%. 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 still expected to be $225 million for fiscal 2026.

The company continues to anticipate comparable EPS guidance of $11.30-$11.60 for fiscal 2026. STZ expects fiscal 2026 EPS to be $9.72-$10.02 compared with $9.86-$10.16 mentioned earlier. It recorded a comparable EPS of $13.78 and a loss per share of 45 cents in fiscal 2025.

Constellation Brands continues to predict interest expenses of $370 million for fiscal 2026. It anticipates a reported tax rate of 18% and a comparable tax rate of 19% for fiscal 2026. The company expects shares outstanding to be 176 million at the end of fiscal 2026, inclusive of share repurchases.

Shares of this Zacks Rank #4 (Sell) company have lost 1.6% in the past three months against the industry’s rise of 2.9%.

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