A month has gone by since the last earnings report for Constellation Brands (STZ). Shares have added about 11.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Constellation Brands due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.
Constellation Brands' Q3 Earnings & Sales Beat Estimates
Constellation Brands 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.
Constellation Brands' 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
Constellation Brands’ 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.
Constellation Brands' 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.
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’ 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%. 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. Constellation Brands 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -13.46% due to these changes.
VGM Scores
At this time, Constellation Brands has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a score of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. Notably, Constellation Brands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Constellation Brands Inc (STZ): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
