Corona Parent Constellation Brands Navigates Soft Sales With Robust Beer Margins

Despite a slight dip in overall sales, Constellation Brands, Inc.’s (NYSE:STZ) recent fiscal first-quarter results highlight the resilience of its beer segment, driven by impressive gross margins. This performance and cost efficiencies have allowed the company to reaffirm its full-year guidance even amidst a challenging market.

Constellation Brands products range from popular Mexican beers like Corona and Modelo to premium wines such as Kim Crawford and The Prisoner Wine Company, and craft spirits like Casa Noble Tequila and High West Whiskey.

Bank of America Securities (BofA) analyst Peter T. Galbo maintained the Neutral rating on Constellation Brands with a price forecast of $180.

Constellation Brands posted fiscal first quarter earnings per share of $3.22, below the $3.30 consensus but above BofA’s $3.00 estimate, driven by stronger-than-expected beer gross margins and lower SG&A costs.

Also Read: Non-Alcoholic Beer Sales Up 9% In 2024, Experts Predict It Will Be The Second-Largest Beer Category Worldwide In 2025

While total sales came in slightly below expectations due to softness in both beer and wine & spirits, the company reaffirmed its fiscal year guidance, which may raise skepticism given it implies an acceleration despite weaker first quarter trends.

The beer segment is expected to improve beginning in the second quarter, helped by easier comparisons, although June scanner data showed mid-single-digit declines.

Galbo pointed out that depletions fell 2.6% year-over-year in the first quarter, slightly worse than BofA’s estimate but in line with consensus, while shipments declined 3.3%.

There was one less selling day in the quarter, which had more than 1% negative impact on shipment and depletion growth rates. No other selling day impacts are expected for the remainder of fiscal year 2026.

Gross margins in beer exceeded forecasts at 53.1%, driven by roughly $40 million in cost and operational efficiencies. Marketing spend was $201 million, lower than the estimated $220 million, and is expected to be weighted toward the first half.

Wine & Spirits underperformed with sales of $280.5 million, though operating losses of $6 million were better than anticipated.

Galbo writes that valuing STZ shares at 13x reflects a justified discount to their 5-year average, given ongoing challenges in the beer segment, including softer demand from Hispanic consumers and broader industry headwinds.

Price Action: STZ shares are trading higher by 4.96% to $174.68 at last check Wednesday.

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