Executive Summary

Q2 FY2026 delivered a mixed print: consolidated net sales fell 15% year over year to $2.48B, but comparable EPS came in at $3.63, ahead of S&P Global consensus, driven by pricing, cost savings, and tax mix; Beer remained best-in-class margins despite volume deleverage, while Wine & Spirits reflected divestiture impacts and distributor terms .
Versus Q1, revenue dipped sequentially while margins expanded, with operating margin at 35.2% (vs. 28.4% in Q1); Beer margin rose to 40.6% despite lower shipments, offsetting aluminum tariffs and higher marketing spend .
Guidance: reported EPS was lowered to $9.86–$10.16, while comparable EPS was affirmed at $11.30–$11.60; Beer FY26 outlook was reiterated for net sales decline of 2–4% and operating income decline of 7–9%; cash flow, capex, and FCF targets were maintained .
Stock-relevant narrative: management emphasized cyclical macro headwinds (Hispanic consumer softness, lower beer occasions) over structural issues, continued marketing investment, tariff headwinds (~$70M Beer; ~$20M Wine), and inventory rebalancing being a Q2-timed, distributor-only action; cost savings YTD >$100M support margin resilience .

What Went Well and What Went Wrong

What Went Well

Comparable EPS of $3.63 beat S&P Global consensus by ~$0.22, with operating margin expansion and continued beer category dollar share gains in Circana channels; management highlighted “disciplined innovation” and brand investment .
Beer portfolio leadership persisted: Modelo Especial retained #1 brand by dollar sales; Pacifico and Victoria delivered double-digit growth; Corona Sunbrew was cited as the #1 new brand in dollars and a top share gainer .
Cost savings execution remained robust: >$500M delivered since investor day and >$100M YTD, with Q2 Beer savings ~$65M (supplier/sourcing, rail logistics), supporting margin durability .

What Went Wrong

Beer shipments declined 8.7% YoY with depletions down 2.7%, reflecting socioeconomic demand headwinds and an earlier-than-usual distributor inventory rebalancing; Beer net sales fell 7% and Beer operating margin decreased 200 bps YoY .
Wine & Spirits net sales dropped 65% and operating margin swung to -14.6%, driven by SVEDKA and 2025 Wine Divestitures and changes in distributor contractual obligations .
Tariffs and fixed overhead weighed on margins (~100 bps headwind), with marketing investment adding ~60 bps of incremental margin pressure; Beer FY26 guide reset earlier (Sep 2) to declines in net sales and operating income .

Financial Results

Metric	Q2 FY2025	Q1 FY2026	Q2 FY2026
Net Sales ($USD Billions)	$2.92	$2.52	$2.48
Gross Profit ($USD Billions)	$1.51	$1.27	$1.31
Operating Income (Loss) ($USD Billions)	$(1.23)	$0.71	$0.87
Operating Margin (%)	(42.1)%	28.4%	35.2%
Net Income (Loss) Attributable to CBI ($USD Billions)	$(1.20)	$0.52	$0.47
Diluted EPS (GAAP) ($)	$(6.59)	$2.90	$2.65
Comparable Operating Income ($USD Billions)	$1.02	$0.81	$0.89
Comparable Operating Margin (%)	37.8%	32.2%	35.7%
Comparable EPS ($)	$4.32	$3.22	$3.63

Segment breakdown:

Segment Metric	Q2 FY2025	Q1 FY2026	Q2 FY2026
Beer Net Sales ($USD Billions)	$2.53	$2.23	$2.35
Beer Operating Income ($USD Billions)	$1.08	$0.87	$0.95
Beer Operating Margin (%)	42.6%	39.1%	40.6%
Wine & Spirits Net Sales ($USD Billions)	$0.39	$0.28	$0.14
Wine & Spirits Operating Income (Loss) ($USD Billions)	$0.07	$(0.01)	$(0.02)
Wine & Spirits Operating Margin (%)	18.1%	(2.1)%	(14.6)%

KPIs:

KPI	Q2 FY2025	Q1 FY2026	Q2 FY2026
Beer Shipments (mm 24-pack 12oz CEs)	128.6	111.3	117.4
Beer Depletions YoY (%)	—	(2.6)%	(2.7)%
Wine & Spirits Shipments (mm 9L cases)	5.5	3.9	1.3

Consensus vs. actual (S&P Global):

Metric	Q1 FY2026 Consensus	Q1 FY2026 Actual	Q2 FY2026 Consensus	Q2 FY2026 Actual
EPS ($)	3.29*	3.22	3.41*	3.63
Revenue ($USD Billions)	2.56*	2.52	2.46*	2.48
EBITDA ($USD Billions)	0.95*	0.90*	0.97*	1.01*

Values with asterisk (*) retrieved from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Reported EPS	FY2026	$10.77–$11.07	$9.86–$10.16	Lowered
Comparable EPS	FY2026	$11.30–$11.60	$11.30–$11.60	Maintained
Enterprise Organic Net Sales	FY2026	Decline (6)%–(4)%	Decline 4%–6%	Maintained
Beer Net Sales	FY2026	Decline (4)%–(2)%	Decline 2%–4%	Maintained
Beer Operating Income	FY2026	Decline (9)%–(7)%	Decline 7%–9%	Maintained
Wine & Spirits Organic Net Sales	FY2026	Decline (20)%–(17)%	Decline (17)%–(20)%	Maintained
Wine & Spirits Organic Operating Income	FY2026	Decline (100)%–(97)%	Decline (97)%–(100)%	Maintained
Corporate Expense	FY2026	~$225M	~$225M	Maintained
Interest Expense, net	FY2026	~$370M	~$370M	Maintained
Reported Tax Rate	FY2026	~18%	~18%	Maintained
Comparable Tax Rate	FY2026	~19%	~19%	Maintained
Weighted Avg Diluted Shares	FY2026	~176M	~176M	Maintained
Operating Cash Flow	FY2026	$2.5–$2.6B	$2.5–$2.6B	Maintained
Capital Expenditures	FY2026	~$1.2B	~$1.2B	Maintained
Free Cash Flow	FY2026	$1.3–$1.4B	$1.3–$1.4B	Maintained
Dividend	Q2 FY2026	$1.02/share declared (Oct 1)	$1.02/share (payable Nov 13)	Maintained

Note: FY2026 outlook was reset on Sept 2; Oct 6 affirmed comparable EPS and cash flow guidance while lowering reported EPS.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 FY2026)	Current Period (Q2 FY2026)	Trend
Macro/Hispanic consumer	Emphasized socioeconomic headwinds; loyalty strong; monitoring GDP/inflation/unemployment; earlier tariff impact modest	Cyclical > structural; 80% consumers express concern; Hispanic buy-rate softness; cautious optimism; California weakness highlighted	Persistent macro headwind; improving caution
Tariffs	Incremental aluminum tariff impact ~$20M for balance of year (seasonality); ~20 bps margin hit	FY26 tariff impact ~$70M Beer and ~$20M Wine; headwind tracks volume	Greater quantified impact
Cost savings/operations	Hedging (peso >80% hedged), operational improvements; distribution gains	~$65M Q2 Beer savings; >$100M YTD; logistics (60’ rail, double stacking)	Ongoing savings; execution focus
Marketing/brand	High share of voice; investment in MLB/NFL; Oro pricing action; innovation (Non-Alc, Oro, Cheladas)	No pullback; Corona MLB, Modelo NFL/CFB; Sunbrew #1 new brand	Continued heavy investment
Inventory (Beer)	Seasonality overship ahead of summer	Q2 pulled forward distributor rebalancing; inventories at “good spot”; no retailer destocking	Normalized H2 alignment
Wine & Spirits	Focus on higher-end; organic depletions +2%; divestitures closed	H2 margin improvement expected (volume seasonality, DTC vintage releases); U.S. depletion growth ~2% maintained	Improving top line trajectory

Management Commentary

“While we continue to navigate a challenging socioeconomic environment that has dampened consumer demand… we are pleased to continue to lead the U.S. Beer industry in dollar share gains… and deliver cash returns to shareholders.” — Bill Newlands, CEO .
“We are confident in the longer-term growth trajectory… much of FY2026 capex is committed long-lead items; beyond FY2026 we are reviewing opportunities to slow or avoid capex.” — Garth Hankinson, CFO .
“Corona Sunbrew is the number one new brand in dollars and the number four share gainer… we’ve returned Corona’s advertising focus to the beer and its iconic beach essence.” — Bill Newlands .
“Tariff impact this year is about $70M on Beer and $20M on Wine… largely tracking volumes.” — Garth Hankinson .
“We have twice the share of Gen Z as part of our overall mix versus the industry average.” — Bill Newlands .

Q&A Highlights

Macro vs. structural: Management views volume softness as primarily cyclical; structural factors (cannabis, RTDs) currently minor; continued investment in marketing to protect brand equity .
Beer margins sustainability: Acknowledged best-in-class 39–40% benchmark; unwilling to guide beyond FY26 given macro; margin drivers include depreciation timing, savings agenda, and eventual return to growth .
Tariffs/margins: Headwinds ~100 bps from fixed overhead/tariffs and ~60 bps from higher marketing; offset by lower comp/benefits in H2 .
Distributor inventory: Q2 ship-dip driven by summer overship and earlier rebalancing; inventories now normalized; no retailer destocking; PODs and shelf share gaining .
Affordability: Repositioning within light beer (Oro, Premier) and price-pack architecture to meet constrained consumers; smaller sizes and price points in focus .

Estimates Context

Q2 FY2026: Comparable EPS $3.63 beat S&P Global consensus $3.41*; revenue $2.48B beat $2.46B*; EBITDA $1.01B beat $0.97B*.
Q1 FY2026: Comparable EPS $3.22 missed $3.29*; revenue $2.52B missed $2.56B*; EBITDA $0.90B vs. $0.95B*.
Values with asterisk (*) retrieved from S&P Global. Sources for actuals: .

Implications: Consensus likely revises Beer FY26 operating income and margin trajectory lower (already reflected in Sept guide), but Q2 beat on EPS/revenue may temper near-term negative revisions; watch for tariff flow-through and H2 margin cadence.

Key Takeaways for Investors

Beer remains the profit engine with resilient margins (40.6% in Q2) despite volume deleverage; cost savings and pricing continue to offset fixed overhead and tariff headwinds .
Near-term macro pressure (Hispanic consumer softness, fewer beer occasions) persists; management is leaning into marketing, distribution, and affordability via price-pack architecture—supporting share but limiting margin upside short-term .
Inventory rebalancing was distributor-only and pulled into Q2; normalization expected in H2 with shipments tracking depletions—reduces risk of further destocking headlines .
FY2026 guidance now frames a lower reported EPS range but affirms comparable EPS and cash flow targets; focus remains on Mexico brewery investments (~$1.0B of ~$1.2B FY capex) and balanced capital returns (dividend $1.02, $604M buybacks YTD) .
Trading lens: Q2 beat vs. consensus and reiterated comparable EPS may support the stock near term, but sustained macro/tariff headwinds and Beer operating income decline guide constrain multiple expansion; monitor holiday sell-through and California labor trends .

Sources: Q2 FY2026 8-K release and financials ; Q2 FY2026 call transcript ; Sep 2 outlook update ; Q1 FY2026 8-K and financials ; Dividend PR .

CONSTELLATION BRANDS, INC. (STZ)·Q2 2026 Earnings Summary