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CONSTELLATION BRANDS, INC. (STZ)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered net sales of $2.515B (-6% YoY) and comparable EPS of $3.22; results were impacted by softer consumer demand and wine divestitures, while beer maintained category leadership in U.S. tracked channels .
  • Versus S&P Global consensus, STZ modestly missed on EPS ($3.22 vs $3.29*) and revenue ($2.515B vs $2.556B*); beer net sales declined 2% and wine & spirits fell 28% YoY as mainstream wine divestiture closed in June .
  • Guidance: reported FY26 EPS was lowered to $12.07–$12.37 (from $12.33–$12.63), while comparable EPS was maintained at $12.60–$12.90; cash flow targets unchanged (OCF $2.7–$2.8B; FCF $1.5–$1.6B) .
  • Management emphasized ongoing macro/tariff headwinds (incremental aluminum tariff ≈$20M and ~20 bps margin hit), but affirmed beer outlook (0–3% net sales and 0–2% operating income growth) and expects sequential improvement on easier summer comps .

Note: *Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Beer continued to lead the U.S. category: STZ was the #1 dollar share gainer with 6 of the top 15 share-gaining brands; Modelo Especial remained the #1 brand in dollar sales, Pacifico delivered double-digit growth, and Corona family had top 15 gainers .
  • Comparable EPS of $3.22 and comparable operating margin of 32.2% show resilient core profitability despite demand headwinds and portfolio reshaping .
  • Strong cash generation supported disciplined capital allocation: $637M operating cash flow and $444M free cash flow in the quarter; $381M repurchases; dividend declared $1.02 per Class A share .

What Went Wrong

  • Top-line softness: consolidated net sales declined 6% YoY; beer net sales fell 2% on 3.3% shipment declines; wine & spirits net sales dropped 28% with operating margin down to -2.1% .
  • Tariff and cost pressures: management quantified an incremental ~$20M aluminum tariff headwind (post-Q1) and ~20 bps margin impact, noting limited ability to fully offset via volume .
  • Category/macro headwinds: depletions decreased 2.6% in beer (adjusted -1.2% for one fewer selling day); management cited ongoing socioeconomic pressures affecting occasions, especially among Hispanic consumers .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ1 FY25 (May 31, 2024)Q4 FY25 (Feb 28, 2025)Q1 FY26 (May 31, 2025)
Net Sales ($USD Millions)$2,661.8 $2,164.2 $2,515.0
Diluted EPS (GAAP) ($)$4.78 $(2.09) $2.90
Comparable EPS (Non-GAAP) ($)$3.57 $2.63 $3.22
Operating Margin (GAAP) (%)35.4% -6.9% 28.4%
Comparable Operating Margin (%)34.7% 30.4% 32.2%

Actual vs Consensus – Q1 FY26

MetricActualConsensus*Surprise
EPS (Comparable, $)$3.22 $3.29*Miss ($0.07)
Revenue ($USD Millions)$2,515.0 $2,555.8*Miss ($40.8)

Note: *Values retrieved from S&P Global.

Segment Breakdown

MetricQ1 FY25Q4 FY25Q1 FY26
Beer Net Sales ($MM)$2,272.8 $1,704.4 $2,234.5
Beer Operating Income ($MM)$923.0 $623.8 $873.4
Beer Operating Margin (%)40.6% 36.6% 39.1%
Wine & Spirits Net Sales ($MM)$389.0 $459.8 $280.5
Wine & Spirits Operating Income ($MM)$59.7 $99.7 $(6.0)
Wine & Spirits Operating Margin (%)15.3% 21.7% -2.1%

KPIs

KPIQ1 FY25Q4 FY25Q1 FY26
Beer Shipments (MM 24/12 CE)115.1 85.4 111.3
Beer Depletions YoY (%)—-1.0% -2.6% (adj. -1.2% for one less day)
Wine & Spirits Shipments (MM 9L)5.6 5.9 3.9
Operating Cash Flow ($MM)—$3,152.2 (FY) $637.2
Free Cash Flow ($MM)—$1,938.1 (FY) $444.4
Share Repurchases ($MM)—$1,123.8 (FY) $381
Dividend per Class A Share ($)$1.01 $1.02 $1.02

Guidance Changes

MetricPeriodPrevious Guidance (Apr 9)Current Guidance (Jul 1)Change
Reported EPS ($)FY26$12.33–$12.63 $12.07–$12.37 Lowered
Comparable EPS ($)FY26$12.60–$12.90 $12.60–$12.90 Maintained
Enterprise Organic Net Sales (%)FY26(2)–1% (2)–1% Maintained
Beer Net Sales (%)FY260–3% 0–3% Maintained
Beer Op Income (%)FY260–2% 0–2% Maintained
W&S Organic Net Sales (%)FY26(17)–(20)% (17)–(20)% Maintained
W&S Organic Op Income (%)FY26(97)–(100)% (97)–(100)% Maintained
Corporate Expense ($MM)FY26~$265 ~$265 Maintained
Interest Expense, Net ($MM)FY26~$385 ~$385 Maintained
Comparable Tax Rate (%)FY26~18% ~18% Maintained
Diluted Shares (MM)FY26~176 ~176 Maintained
Operating Cash Flow ($B)FY26$2.7–$2.8 $2.7–$2.8 Maintained
Capex ($B)FY26~$1.2 (Beer ~$1.0) ~$1.2 (Beer ~$1.0) Maintained
Free Cash Flow ($B)FY26$1.5–$1.6 $1.5–$1.6 Maintained
Quarterly Dividend ($)Near term$1.02 (Q4 FY25) $1.02 (Jul 1) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25, Q4 FY25)Current (Q1 FY26)Trend
Tariffs/macroRaised FY26–FY28 outlook reflecting U.S./Canada tariffs; noted macro uncertainty and lower growth expectations Incremental aluminum tariff ≈$20M and ~20 bps margin hit; macro uncertainty persists Worsening (cost headwind)
Supply chain/operationsCost savings and efficiency initiatives delivered FY25 margin gains; brewery modular expansions planned (Veracruz) Operational improvements tailwind; hedging layered for FX/commodities Improving (execution)
Beer performanceQ3: depletions +3.2%, share gains; Q4: beer op margin 36.6%, category outperformance Q1: beer net sales -2%, depletions -2.6% (adj. -1.2%); still #1 dollar share gainer Soft near term; leadership intact
Pricing/marketingIncremental marketing investments in beer; disciplined pricing actions Q1 seasonal marketing elevated; share of voice #1/#2 for Modelo/Corona Consistent investment
Portfolio strategy (W&S)Announced divestiture of mainstream wine brands; restructuring for $200M savings by FY28 Divestiture closed June; focus on higher-end; organic W&S declines as expected Strategic repositioning on track
Regional trendsQ3: Pacifico ~20% growth; Q4: California macro challenges Pacifico expanding outside CA; CA rebuild may be a tailwind but headwinds persist Mixed

Management Commentary

  • CEO: “While we continued to face softer consumer demand largely driven by what we believe to be non-structural socioeconomic factors… we are pleased to continue to lead the U.S. Beer industry in dollar share gains… and to consistently deliver against our capital allocation priorities.” — Bill Newlands .
  • CFO: “Our cash flow generation enabled us to remain at our ~3.0x comparable net leverage and ~30% dividend payout ratio targets, while… returning over $300 million to shareholders in share repurchases in the first quarter of fiscal 2026.” — Garth Hankinson .
  • On macro/tariffs: “Impact… roughly $20 million… about a 20 basis point hit, but we still believe that we can deliver margins in line…” — Garth Hankinson .
  • On sequential trajectory: “Sequential improvement is required for us to accomplish our guidance… we’re going against easier comps as we progress into the summer months.” — Bill Newlands .

Q&A Highlights

  • Guidance confidence: Affirmed beer outlook despite industry softness; sequential improvement expected on easier comps (summer) .
  • Tariffs/costs: Incremental aluminum tariff ≈$20M; ~20 bps margin impact; volume offsets limited .
  • Consumer dynamics: Hispanic consumer loyalty remains strong; occasions reduced; management focused on controllables (distribution, pack/price architecture) .
  • Marketing/competition: Seasonal marketing cadence; Modelo/Corona leading share of voice; targeted investments in live sports .
  • Brand/innovation: Pacifico growth broadening geographically; pricing adjustments on Oro; Sunbrew ahead of plan; non-alc portfolio gaining share .
  • FX/hedging: Peso hedging >80% for FY26; layered hedges into FY27–FY28 .

Estimates Context

  • Q1 FY26 vs S&P Global consensus: EPS $3.22 vs $3.29* (miss); revenue $2,515.0MM vs $2,555.8MM* (miss). Management maintained beer outlook and comparable EPS guidance, lowered reported EPS range. Expect modest estimate revisions focused on reported EPS trajectory and near-term beer volumes given tariff headwinds and sequential comp dynamics .

Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Beer franchise leadership intact; #1 dollar share gainer with broad brand health, but near-term volumes pressured by macro/socioeconomic factors; sequential improvement expected on easier comps .
  • Guidance mix-shift: reported EPS lowered to $12.07–$12.37; comparable EPS unchanged at $12.60–$12.90, signaling underlying margin resilience despite accounting adjustments and portfolio actions .
  • Tariff headwinds quantifiable (~$20M; ~20 bps); margin plan intact per management; watch aluminum/peso inputs and hedging execution .
  • Cash flow anchors the story: FY26 OCF $2.7–$2.8B and FCF $1.5–$1.6B reiterated; supports buybacks ($381M in Q1) and dividend continuity (Class A $1.02) .
  • W&S portfolio transition executed (mainstream divested); near-term organic declines as guided; medium-term margin uplift targeted via cost savings and higher-end mix .
  • Tactical levers: distribution gains, pack/price architecture, targeted marketing (sports), and innovation (non-alc, Sunbrew, Oro) to drive share/velocity as occasions normalize .
  • Near-term trading lens: Monitor scanner depletions through summer, tariff pass-through and promo cadence, and any updates at upcoming conferences; stock narrative hinges on beer volume stabilization and margin delivery within affirmed guidance .