European Investor
07 Oct 2026, 09:06
Constellation Brands Falls 5.4% Premarket as Weak Beer Depletions and Margin Pressure Overshadow Q2 Growth
Constellation Brands (NYSE: STZ) shares fell about 5.4% in premarket trading after the company reported fiscal 2027 second-quarter results that showed higher sales and earnings but continued weakness in underlying beer demand and pressure on margins.
Second-quarter net sales increased 6% year over year to $2.63 billion, while comparable EPS rose 3% to $3.74. Comparable operating income increased just 1% to $897 million. Constellation reaffirmed its fiscal 2027 comparable EPS outlook of $11.20-$11.90 and its free cash flow target of $1.6 billion-$1.7 billion.
The main concern appears to be the Beer business, which accounts for most of Constellation’s revenue. Beer sales increased 5% to $2.47 billion, helped by a 5.5% increase in shipments, but consumer depletions declined 0.6%. Modelo Especial depletions fell approximately 2%, while Corona Extra declined around 5%. Growth in Pacifico, Victoria and Modelo Chelada only partially offset those declines.
Profitability also weakened. Beer operating income increased only 1% despite the 5% sales increase, while operating margin contracted 160 basis points to 39.0%. Constellation attributed the decline mainly to increased marketing investment and other SG&A spending, which more than offset lower tariff costs and favorable fixed-cost absorption.
Wine and Spirits showed a stronger recovery, with sales increasing 17% to $159.4 million and depletions rising 10.2%. Operating income improved to $6.1 million from a $19.8 million loss a year earlier.
However, management maintained a cautious full-year outlook. Constellation continues to expect organic enterprise sales, Beer sales and organic Wine and Spirits sales to range between a 1% decline and 1% growth in fiscal 2027. Beer operating margin is expected at 37%-38%.
The premarket decline therefore appears to reflect concern that headline shipment growth is running ahead of end-market beer consumption, particularly for flagship Modelo Especial and Corona Extra, while higher spending is limiting operating leverage. The decision to reaffirm rather than raise its comparable earnings outlook despite the stronger quarter may also be contributing to investor caution.
Constellation Brands (NYSE: STZ) shares fell about 5.4% in premarket trading after the company reported fiscal 2027 second-quarter results that showed higher sales and earnings but continued weakness in underlying beer demand and pressure on margins.
Second-quarter net sales increased 6% year over year to $2.63 billion, while comparable EPS rose 3% to $3.74. Comparable operating income increased just 1% to $897 million. Constellation reaffirmed its fiscal 2027 comparable EPS outlook of $11.20-$11.90 and its free cash flow target of $1.6 billion-$1.7 billion.
The main concern appears to be the Beer business, which accounts for most of Constellation’s revenue. Beer sales increased 5% to $2.47 billion, helped by a 5.5% increase in shipments, but consumer depletions declined 0.6%. Modelo Especial depletions fell approximately 2%, while Corona Extra declined around 5%. Growth in Pacifico, Victoria and Modelo Chelada only partially offset those declines.
Profitability also weakened. Beer operating income increased only 1% despite the 5% sales increase, while operating margin contracted 160 basis points to 39.0%. Constellation attributed the decline mainly to increased marketing investment and other SG&A spending, which more than offset lower tariff costs and favorable fixed-cost absorption.
Wine and Spirits showed a stronger recovery, with sales increasing 17% to $159.4 million and depletions rising 10.2%. Operating income improved to $6.1 million from a $19.8 million loss a year earlier.
However, management maintained a cautious full-year outlook. Constellation continues to expect organic enterprise sales, Beer sales and organic Wine and Spirits sales to range between a 1% decline and 1% growth in fiscal 2027. Beer operating margin is expected at 37%-38%.
The premarket decline therefore appears to reflect concern that headline shipment growth is running ahead of end-market beer consumption, particularly for flagship Modelo Especial and Corona Extra, while higher spending is limiting operating leverage. The decision to reaffirm rather than raise its comparable earnings outlook despite the stronger quarter may also be contributing to investor caution.
