Constellation Brands 2026 Q1 Earnings Misses Targets as Net Income Falls 41.3%

Constellation Brands (STZ) reported its fiscal 2026 Q1 earnings on Jul 01st, 2025. The company reported earnings that fell short of analyst expectations, with net income declining significantly. The earnings per share (EPS) also missed targets, reflecting a challenging quarter. Despite this, Constellation Brands maintained its guidance for the year. The company's management attributed the performance to softer consumer demand influenced by external socioeconomic factors. Constellation Brands' strategic initiatives and future outlook will be crucial to watch in the upcoming quarters as the company navigates these headwinds.

Revenue
Constellation Brands reported a decline in total revenue, which decreased by 5.5% to $2.52 billion in Q1 2026 from $2.66 billion the previous year. The beer segment generated $2.23 billion, while the wine and spirits segment contributed $280.50 million overall. Within this segment, wine accounted for $258.50 million, and spirits brought in $22 million. The company's consolidated net sales reached $2.68 billion.

Earnings/Net Income
Constellation Brands saw its EPS drop by 39.6% to $2.90 in Q1 2026, down from $4.80 in Q1 2025. Net income also declined by 41.3%, falling to $523.80 million from $892.80 million in the same period the previous year. The significant EPS decline indicates weaker financial performance.

Price Action
The stock price of Constellation Brands edged up 2.29% during the latest trading day and increased by 1.17% over the most recent full trading week. However, the stock has dropped 7.40% month-to-date.

Post-Earnings Price Action Review
The strategy of purchasing Constellation Brands (STZ) shares following a quarterly revenue drop on the financial report release date and holding them for 30 days has historically resulted in poor performance. The strategy's compound annual growth rate (CAGR) was -1.17%, with an excess return of -95.34% compared to the benchmark, indicating substantial underperformance. The Sharpe ratio stood at -0.05, reflecting unfavorable risk-adjusted returns. Furthermore, the maximum drawdown reached -40.42%, highlighting the strategy's susceptibility to significant downturns. This performance suggests that caution is warranted when considering investments in Constellation Brands following quarterly revenue declines, as the strategy has not delivered favorable results historically.

CEO Commentary
"While we continued to face softer consumer demand largely driven by what we believe to be non-structural socioeconomic factors, our teams remain focused on executing the key initiatives that underpinned the outlook we recently provided for fiscals 2026 to 2028. We are pleased to continue to lead the U.S. Beer industry in dollar share gains. Our cash flow generation enabled us to remain at our ~3.0x comparable net leverage and ~30% dividend payout ratio targets, while advancing our modular brewery investments and returning over $300 million to shareholders in share repurchases in the first quarter of fiscal 2026." Bill Newlands - President and Chief Executive Officer

Guidance
"We update fiscal 2026 reported EPS outlook to $12.07 - $12.37 and maintain comparable EPS outlook of $12.60 - $12.90. The annual operating cash flow and free cash flow expectations are unchanged, with targets of $2.7 - $2.8 billion for operating cash flow and a projection of $1.5 - $1.6 billion for free cash flow."

Additional News
In recent weeks, Constellation Brands has made significant moves, including the closure of a wine transaction with The Wine Group. This transaction allows Constellation Brands to focus on a portfolio of higher-growth, higher-margin brands. Additionally, the company has announced the redemption of its 4.75% Senior Notes due 2025 and 5.00% Senior Notes due 2026, demonstrating its commitment to optimizing its capital structure. Furthermore, Constellation Brands returned over $300 million to shareholders through share repurchases in Q1 2026, highlighting its efforts to enhance shareholder value despite challenging market conditions.