Here’s a sobering reality check for beer lovers and investors alike: Constellation Brands, the powerhouse behind Modelo, is facing a bumpy road ahead despite beating earnings expectations. Yes, you read that right—even though the company outperformed Wall Street’s predictions for its fiscal second quarter, it’s sticking to its lowered full-year guidance. But here’s where it gets controversial: Is this a temporary stumble or a sign of deeper challenges in the alcohol industry? Let’s dive in.
On Monday, Constellation Brands (STZ) reported its earnings, surpassing both top and bottom line estimates. Shares climbed about 3% in after-hours trading, but the optimism was tempered by the company’s cautious outlook. Here’s the breakdown of how they performed against expectations, based on LSEG analyst surveys:
- Earnings per share: $3.63 adjusted (vs. $3.38 expected)
- Revenue: $2.48 billion (vs. $2.46 billion expected)
For the quarter ending August 31, Constellation posted a net income of $466 million, or $2.65 per share, a dramatic turnaround from the $1.2 billion loss (or $6.59 per share) reported the same time last year. Excluding restructuring costs and other one-time expenses, earnings came in at $3.63 per share.
However, it’s not all cheers and toasts. Net sales dropped 15% year-over-year to $2.48 billion, and the operating margin shrank by 200 basis points, partly due to aluminum tariffs. And this is the part most people miss: These numbers reflect a broader struggle in the industry, where macroeconomic headwinds—like inflation and shifting consumer habits—are taking a toll.
CEO Bill Newlands acknowledged the challenges in a statement, saying, ‘While we continue to navigate a tough socioeconomic climate that has dampened consumer demand, our teams remain focused on our strategic goals, including expanding distribution, innovating responsibly, and investing in our brands.’ Sounds reassuring, but is it enough?
In September, Constellation made headlines by slashing its full-year guidance, citing a ‘challenging macroeconomic environment.’ It lowered its comparable earnings per share outlook to $11.30–$11.60, down from $12.60–$12.90, and reaffirmed this in Monday’s report. The company also expects organic net sales to fall 4%–6% in fiscal 2026, a stark contrast to its earlier prediction of 1% growth to a 2% decline.
Here’s where it gets even more intriguing: Constellation has pointed to a decline in demand from Hispanic consumers, attributing it to concerns over President Donald Trump’s immigration policies and potential job losses. Is this a fair assessment, or is there more to the story? It’s a question that’s sure to spark debate.
Looking ahead, Constellation executives will discuss these challenges in a call with analysts tomorrow at 8 a.m. ET. But the bigger question remains: Can the company weather this storm, or is this the new normal for the alcohol industry? What do you think? Let us know in the comments—we’d love to hear your take on whether Constellation’s struggles are a temporary hiccup or a sign of deeper trends.
