Constellation Brands, Inc. (NYSE:STZ) reported strong second-quarter earnings beat on Tuesday after market close. The results were driven by higher shipment for its beer business.
Adjusted EPS of $3.74, beat the $3.56 estimate, while sales of $2.633 billion topped the $2.542 billion estimate.
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The second quarter pricing net of mix was roughly flat, including a 25-basis-point headwind from the high-end light beer repositioning.
Constellation led World Cup beer share gains, delivering three times the gains of the next-best competitor and 400 basis points of category outperformance while spending significantly less.
Year-to-date operating cash flow reached $1.5 billion, down 1%, while free cash flow rose 4% to $1.1 billion.
Constellation repurchased about $530 million of shares year-to-date, with $2.5 billion remaining under its repurchase authorization through fiscal 2028. The company declared a quarterly cash dividend of $1.03 per Class A Common Stock share.
Business Performance
Beer business posted 5% net sales growth and 1% operating income growth, leading the category in dollar and volume share gains and outperforming total beer by four percentage points in both year-over-year dollar and volume sales across Circana U.S. tracked channels.
The Wine and Spirits business delivered 17% net sales growth and 10.2% depletions growth, outperforming the broader category in both dollar and volume sales.
September trends strengthened beyond Labor Day timing, supported by college football and other programming. Management said there are no current signs of top- or bottom-line deterioration and that a significant trend reversal would be needed to reach the low end of fiscal 2027 EPS guidance.
Management sees further runway for Modelo, Corona, Pacifico and Victoria, with newer brands expected to grow faster than the established portfolio.
Constellation has achieved approximately $600 million in cost efficiencies since Investor Day and plans to make these efforts more systematic through a multi-year continuous improvement program focused on margin opportunities and funding future growth.
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Outlook
The company raised fiscal 2027 GAAP EPS guidance to $11.85-$12.55 from $11.50-$12.20, versus the $11.93 estimate.
Constellation Brands reiterated adjusted EPS guidance at $11.20-$11.90, compared with the $11.72 estimate and expects to reach the high end if positive September trends continue.
Beer operating margins are expected at 34.5%-35.5% in the second half of FY2027.
Acquisition of SpikedAde
Today, Constellation Brands acquired SpikedAde, a spirit-based ready-to-drink (RTD) brand.
The deal includes a $75 million upfront payment for full ownership and up to $278 million in contingent payments over five years based on SpikedAde’s future performance.
The company plans to use its brand-building and distribution capabilities to expand SpikedAde across the U.S. and strengthen its position in the fast-growing RTD market.
The acquisition gives Constellation exposure to growing demand for flavorful, sessionable RTDs designed for modern social occasions.
STZ Stock Price Activity: Constellation Brands shares were up 1.73% at $117.93 at the time of publication on Wednesday.
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