TLDR
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Q1 FY26 adjusted EPS of $3.22 missed $3.31 estimate; reported EPS was $2.90
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Revenue fell 5.5% YoY to $2.52 billion, missing the $2.55 billion forecast
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Tariffs on aluminum and weak beer demand dented margins and shipment volume
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Beer shipments dropped 3.3%, with the Hispanic consumer slowdown impacting sales
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FY26 guidance reaffirmed: EPS between $12.60–$12.90, organic revenue from -2% to +1%
Constellation Brands, Inc. (NYSE: STZ) closed at $166.42 on July 1, up 2.30%, after releasing first-quarter fiscal 2026 results.
Constellation Brands, Inc. (STZ)
The beverage giant behind Modelo and Corona reported weaker-than-expected earnings and revenue, citing aluminum tariffs and soft consumer demand. Despite the miss, the company maintained its full-year guidance, which helped stabilize investor sentiment.
Earnings Miss on Tariff Pressure
For the quarter ended May 31, Constellation posted adjusted earnings of $3.22 per share, short of the $3.31 average analyst estimate. Reported EPS came in at $2.90, down from $4.78 a year earlier. Net income totaled $516.1 million, a sharp decline from $877 million in the prior-year period.
Higher aluminum costs, driven by tariffs of 25% in March and 50% in early June, were cited as a major factor weighing on profitability. Operating margin dropped 150 basis points to 28.4%, while adjusted EBITDA fell to $829.7 million, missing analyst forecasts by nearly 13%.
Sales Slide on Weaker Demand and Divestitures
Net revenue for the quarter dropped 5.5% year over year to $2.52 billion, falling short of the $2.55 billion consensus. This decline was attributed to weaker beer demand and the sale of the Svedka vodka brand. Organic revenue declined 4%, reversing recent trends.
Beer shipment volumes fell 3.3%, with CEO Bill Newlands highlighting softer purchasing behavior among Hispanic consumers, who account for around half of Constellation’s beer sales. He pointed to “non-structural socioeconomic factors” and policy concerns as contributing to the dip.
Outlook Held Despite Challenges
Despite disappointing Q1 results, the company reaffirmed its full-year fiscal 2026 guidance. Management maintained its adjusted EPS target of $12.60 to $12.90 and expects organic net sales to fall between 2% and rise by 1%.
Free cash flow margin increased to 17.7%, up from 11.8% in the prior-year period, reflecting improved cash management. This indicates potential resilience even amid tariff pressures and uncertain demand.
Revenue Trends and Market Position
Constellation’s 3.2% annualized revenue growth over the past three years suggests modest expansion, but scale constraints and limited new distribution opportunities have capped broader growth. Analysts now expect revenue to fall by 6.6% over the next 12 months, a marked deceleration.
While Modelo Especial continues to hold the top-selling beer spot in the U.S., broader demand shifts and cost pressures are beginning to affect the brand’s performance.
Conclusion
Constellation Brands faced a tough Q1 FY26, with earnings and revenue falling short amid rising aluminum costs and weakening beer demand. Still, the company’s reaffirmed outlook and steady free cash flow suggest it aims to manage through these headwinds. Whether STZ can return to sustainable growth will depend on its ability to adapt pricing strategies and regain traction with key consumer groups.
