Beer Maker Constellation Brands' Q3 Sales Hit By Subdued Spending; Stock Slides

Constellation Brands, the leading beer, wine, and spirits producer, reported a challenging third quarter, with net sales remaining flat compared to the prior-year quarter. The company's stock price slid over 2% in premarket hours on Friday, following the earnings release. The subdued spending on beer, particularly among legal drinking age consumers, has impacted the company's sales and growth prospects.



The company's beer business, which accounts for the majority of its revenue, delivered a net sales increase of 3% supported by a 1.6% rise in shipment volumes. However, this growth rate is lower than the company's historical growth trends. The beer business was the #1 dollar share gainer and had 6 of the top 15 dollar share gaining brands in Circana channels across the entire U.S. beer category. However, the Corona Extra brand declined approximately 1% in depletions, while the Modelo Especial brand grew more than 3%.

Constellation Brands' wine and spirits business completed the divestiture of the SVEDKA brand in January and continues to advance commercial and operational actions expected to drive performance improvements. The company generated year-to-date operating cash flow of $2.6 billion, a 9% increase, and free cash flow of $1.6 billion, a 13% increase.



The company updated its fiscal 2025 outlook, lowering its growth expectations for net sales and operating income. Constellation Brands now expects net sales to grow 2-5% and operating income to grow 5-10%. The company also revised the lower-end of its comparable EPS growth guidance. Constellation Brands' stock price has historically reacted negatively to earnings misses or guidance cuts, and investors can expect a potential negative reaction to the recent earnings miss and guidance cut.

In conclusion, Constellation Brands' Q3 performance was impacted by subdued spending on beer, particularly among legal drinking age consumers. The company's stock price slid following the earnings release, and investors can expect a potential negative reaction to the recent earnings miss and guidance cut. However, it is essential to consider other factors that may influence the stock price, such as the overall market sentiment, sector performance, and the company's long-term growth prospects. Additionally, investors should pay close attention to the company's future earnings reports and guidance to assess its ability to bounce back from these setbacks.