Core Viewpoint - Constellation Brands, Inc. has announced a revised schedule for reporting its second quarter financial results, now set for October 6, 2025, with a conference call to follow on October 7, 2025, to discuss the results and future outlook [1][2]. Financial Reporting - The company will report its second quarter financial results for the period ending August 31, 2025, on October 6, 2025, after the close of U.S. markets [1]. - A live conference call will be held on October 7, 2025, at 8:00 a.m. ET, featuring discussions on financial results, operating performance, and strategic initiatives [2]. Access to Information - The conference call can be accessed by dialing +1-877-407-9121 with the conference identification number 13755621, starting at 7:50 a.m. ET [3]. - A live webcast of the conference call will be available on the company's investor relations website, along with financial information and reconciliations of GAAP and non-GAAP measures [3]. Company Overview - Constellation Brands is a leading international producer and marketer of beer, wine, and spirits, with operations in the U.S., Mexico, New Zealand, and Italy [4]. - The company's mission focuses on building beloved brands and enhancing human connections, which has contributed to its growth as one of the fastest-growing large consumer packaged goods companies in the U.S. [4]. Product Portfolio - The company offers a diverse range of products, including high-end imported beers like Corona Extra and Modelo Especial, a variety of wines, and craft spirits such as Casa Noble Tequila and High West Whiskey [5]. Sustainability and ESG Strategy - As an agriculture-based company, Constellation Brands emphasizes sustainable and responsible operations, integrating its ESG strategy into its business practices [6].

Company Overview - Constellation Brands, Inc. (STZ) is a leading beverage alcohol company with a market cap of $25.8 billion, known for brands like Corona, Modelo, Robert Mondavi, and Svedka Vodka [1] - The company is classified as a large-cap stock, emphasizing its size and influence in the beverages - brewers industry [2] Financial Performance - STZ's revenue for Q1 2026 declined by 5.5% year-over-year to $2.5 billion, missing consensus estimates by 1.9% [5] - Adjusted EPS for the same quarter was $3.22, down 9.8% from the prior year and 3.6% below Wall Street estimates [5] Stock Performance - STZ shares have decreased 44% from their 52-week high of $261.06, reached on September 30, 2024 [3] - Over the past three months, STZ shares declined by 14.5%, underperforming the First Trust Nasdaq Food & Beverage ETF (FTXG), which saw a 1.3% loss [3] - In the last 52 weeks, STZ has fallen 41.7%, significantly lagging behind FTXG's 13.9% decline [4] - Year-to-date, STZ shares are down 33.8%, compared to FTXG's 3.6% drop [4] Market Trends - STZ has been trading below its 200-day moving average since early October 2024 and below its 50-day moving average since late May, indicating a bearish trend [4] - The company has underperformed its rival, Anheuser-Busch InBev SA/NV (BUD), which declined by 5.4% over the past 52 weeks but gained 18.7% year-to-date [6]

Core Insights - Constellation Brands and Kraft Heinz have both experienced significant stock declines over the past year, with Constellation down over 40% and Kraft Heinz down about 25%, while the S&P 500 rose nearly 20% during the same period [3][9][12] Constellation Brands - Constellation generates most of its revenue from beer, facing challenges from tariffs and declining demand among younger consumers [5][7] - The Trump administration's tariffs on aluminum have increased from 25% to 50%, impacting Constellation's margins as 39% of its beer shipments come in aluminum cans [6] - The company is attempting to adapt by launching new alcoholic beverages and divesting lower-end brands to focus on higher-end products, which may strengthen long-term margins but hinder near-term revenue growth [8] - For fiscal 2026, Constellation expects organic sales to dip 4% to 6% and comparable EPS to drop 16% to 18%, leading to a stock valuation of 12 times forward earnings [9] Kraft Heinz - Kraft Heinz owns a portfolio of well-known brands but has struggled post-merger due to a focus on cost-cutting rather than brand revitalization [10] - The company faced a $15 billion write-down in 2019 and has since recovered by divesting weaker brands and raising prices, but organic net sales dipped 2% in 2024 [11][12] - For 2025, Kraft Heinz expects organic net sales to decline by 1.5% to 3.5% and adjusted EPS to drop 13% to 18%, with the stock trading at 10 times forward earnings [12] - Kraft Heinz plans to split into two companies by the second half of 2026, but concerns remain about whether this will effectively address its challenges [13] Investment Considerations - Both companies face significant challenges that hinder their attractiveness as investments, with a preference for Constellation due to clearer long-term strategies [14][15]

Core Viewpoint - The article expresses a bearish outlook on Constellation Brands (NYSE: STZ), citing lackluster operating performance and a modest future outlook as reasons for a "sell" rating [1]. Group 1: Company Performance - Constellation Brands has shown underwhelming operating performance, which has influenced the analyst's negative rating [1]. - The future outlook for the company is described as modest, indicating limited growth potential [1]. Group 2: Investment Philosophy - The analyst emphasizes the importance of identifying undervalued stocks with a focus on balancing risk and reward [1]. - A belief is expressed that the best investment ideas are often the simplest, and that contrarian views can be beneficial [1].

Core Viewpoint - Constellation Brands has experienced a significant stock decline of 32% in 2023, underperforming the S&P 500, which has risen by 9% due to lowered sales and earnings forecasts linked to decreased demand for its beers among the Hispanic community in the U.S. [2][3] Financial Performance - Constellation Brands' revenues have decreased significantly in recent years, with a 0.5% decline from $10 billion over the last 12 months, contrasting with a 5.1% growth for the S&P 500 [6] - The company holds a price-to-sales (P/S) ratio of 2.7 compared to 3.3 for the S&P 500, and a price-to-free cash flow (P/FCF) ratio of 12.9 versus 21.0 for the S&P 500 [6] - Operating income over the last four quarters amounted to $3.2 billion, with an operating margin of 31.7%, while net income registered at -$442 million, indicating a net income margin of -4.4% [12] Profitability and Financial Stability - Profit margins for Constellation Brands are approximately at the median level for companies within the Trefis coverage universe, but the balance sheet appears fragile [7][8] - The company has a debt of $12 billion against a market capitalization of $27 billion, resulting in a debt-to-equity ratio of 43.2%, which is higher than the S&P 500's 20.5% [12] Resilience in Downturns - STZ stock has shown slightly worse performance than the S&P 500 during recent downturns, indicating moderate resilience [9][10] - The overall assessment of Constellation Brands across key performance indicators shows weaknesses, reflected in its current low valuation, with growth rated as very weak, profitability as moderate, financial stability as weak, and downturn resilience as moderate [13]

Market Trends & Industry Dynamics - Constellation Brands (STC) blames lower demand from Hispanic consumers for its underperformance [1] - The beer industry is facing significant challenges, including tariffs and changing consumer preferences [3] - Molson Coors is a decent company [3] - The rise of cannabis and GLP-1 drugs adds further pressure on the beer market [4] Valuation & Financial Performance - Molson Coors is valued at nine times earnings [2] - Constellation Brands is valued at 12 times earnings [2] - Molson Coors has a valuation of 99 billion [2] - Constellation Brands has a valuation of 26 billion [2] - Molson Coors sells at nine times at 37% [3] Investment Opportunities & Potential Risks - It's possible to argue that STC should be at half of its current valuation [3] - Concerns exist about Constellation Brands' valuation and its ability to maintain its current level [3] - Doubts are raised about the wisdom of investing in Constellation Brands, even if Berkshire Hathaway did [4]

Group 1 - The U.S. beer industry is experiencing significant changes, with updated fiscal '26 guidance indicating a lowered outlook for both top and bottom lines due to ongoing consumer demand headwinds, particularly affecting Hispanic consumers [1][2] - There is considerable concern at the consumer level, characterized by volatility and worries about financial stability, which impacts purchasing behavior [2] - The decline in "4,000 calorie jobs," such as construction, is noted as a negative trend year-on-year, which typically has a positive correlation with consumer spending [3]

Financial Data and Key Metrics Changes - The company has lowered its fiscal 2026 guidance, expecting enterprise top line growth to decline by 4% to 6% and beer business to decline by 2% to 4% [7][10] - Operating income expectations have also been adjusted, with enterprise expected to decline by 9% to 11% and beer business by 7% to 9% [8][10] - Comparable EPS is now projected to be in the range of $1.130 to $1.160 [10] Business Line Data and Key Metrics Changes - The beer volume decline is impacting overhead absorption and operational efficiencies, contributing to a 100 basis point headwind to overall margin for the beer business [8][10] - The company has gained share in 49 of the 50 states, with distribution gains up in the mid-single digits [3][4] Market Data and Key Metrics Changes - The Hispanic consumer segment is facing significant socioeconomic concerns, with 80% worried about socioeconomic factors and 75% about personal finances, leading to reduced shopping occasions [3][25] - The overall beer category is experiencing a decline, with scanner data down 4.5% year to date [12] Company Strategy and Development Direction - The company is focusing on controlling the controllables, such as execution and distribution, while continuing to invest in the category [18] - Innovation is seen as a core competency, with products like Corona Sunbrew performing well and attracting new consumers [26][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging consumer environment and the volatility in the marketplace, particularly affecting Hispanic consumers [2][6] - There is a belief that as the socioeconomic environment normalizes, the beer category will also return to more typical growth patterns [13][16] Other Important Information - The company has returned approximately $600 million to shareholders through share repurchases in the first half of the fiscal year [10] - The impact of new tariffs is expected to be around $70 million for the beer business and $20 million for the wine business, totaling $90 million across the enterprise for the full fiscal year [10] Q&A Session Summary Question: How confident is the company in the medium-term growth outlook for the beer category? - Management believes that the beer category will eventually return to a normalized growth profile, supported by increased loyalty among Hispanic consumers and Gen Z [12][13] Question: What has changed from previous guidance to the current outlook? - The company has seen declining buy rates in key states, particularly those with a high Hispanic population, leading to a more cautious outlook [15][16] Question: How is the company addressing brand equity while competing on price? - The company is strategically adjusting prices for brands like Oro and Premier to remain competitive while maintaining strong brand health and equity [38][44] Question: What is the company's approach to innovation in the beer segment? - Innovation is critical, with successful products like Corona Sunbrew and non-alcoholic options driving interest and new consumer engagement [26][32] Question: How is the wine business performing amid industry challenges? - The wine business has shown positive performance, with brands like Ruffino and Kim Crawford outperforming the category [54][55]

Financial Data and Key Metrics Changes - The company has lowered its fiscal 2026 guidance, expecting enterprise top line growth to decline by 4% to 6% and beer business to decline by 2% to 4% [7] - Operating income expectations have also been adjusted, with enterprise expected to decline by 9% to 11% and beer business by 7% to 9% [7][10] - Comparable EPS is now projected to be in the range of $1,130 to $1,160 [10] Business Line Data and Key Metrics Changes - The beer volume decline is impacting overhead absorption and operational efficiencies, contributing to a 100 basis point headwind to overall margin for the beer business [7][9] - The company has gained share in 49 of the 50 states, with distribution gains up in the mid-single digits [3][4] Market Data and Key Metrics Changes - The Hispanic consumer segment is facing significant socioeconomic concerns, with 80% worried about socioeconomic factors and 75% about personal finances, leading to reduced shopping occasions [3][25] - The overall beer category is experiencing a decline, with scanner data down 4.5% year to date [12] Company Strategy and Development Direction - The company continues to invest in brand equity and marketing, maintaining marketing spend as a percentage of net sales [21] - Innovation is seen as a core competency, with successful products like Corona Sunbrew and non-alcoholic options contributing positively to brand performance [26][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging consumer environment and the volatility in the marketplace, emphasizing the need to control what can be controlled [17] - There is a belief that as the socioeconomic environment normalizes, the beer category will also return to more typical growth patterns [13][15] Other Important Information - The company has returned approximately $600 million to shareholders through share repurchases in the first half of the fiscal year [10] - The impact of new tariffs is expected to be around $70 million for the beer business and $20 million for the wine business, totaling $90 million across the enterprise for the full fiscal year [10] Q&A Session Summary Question: What drove the updated guidance? - The updated guidance reflects ongoing consumer demand headwinds, particularly among Hispanic consumers, and a challenging economic environment [2][3] Question: How confident is the company in the long-term growth of the beer category? - Management believes that long-term growth will eventually normalize as socioeconomic conditions improve, despite current challenges [12][13] Question: What is the impact of tariffs on the business? - The company expects a total tariff impact of approximately $90 million across the enterprise for the fiscal year, affecting margins significantly [10] Question: How is the company addressing the decline in Corona Extra? - The company is refocusing marketing efforts on the brand's core essence, emphasizing its beach-related imagery and refreshing qualities [34] Question: What is the strategy for Modelo's growth in non-traditional markets? - The company is expanding distribution in emerging markets like North and South Dakota and Georgia, leveraging local sports events for brand visibility [36][37]

Fiscal 2026 Outlook Update - The company updated its fiscal year 2026 outlook, projecting organic net sales to decline by 6% to 4% for the enterprise and 4% to 2% for the beer business [11] - The company anticipates a reported operating income growth of 666% to 686%, but a comparable operating income decline of 11% to 9% [11] - Corporate expense is expected to be $225 million [11] - The company forecasts reported EPS of $10.77 to $11.07 and comparable EPS of $11.30 to $11.60 [11] - Operating cash flow is projected to be $2.5 billion to $2.6 billion, with free cash flow estimated at $1.3 billion to $1.4 billion [11] Market and Consumer Trends - Ongoing U S consumer demand headwinds are impacting the business, with employment in 4,000+ calorie jobs remaining pressured [12] - Consumer sentiment remains volatile and depressed [12, 13] - High-end beer buy rates are declining due to ongoing consumer headwinds [14, 15] - The company's beer brands have higher levels of exposure to the Hispanic consumer, who are showing elevated concern about personal finances and the socioeconomic environment [17, 18, 19, 20] - Hispanic consumer high-end beer buy rates are down more than the total consumer [21, 22] Business Execution - The company is gaining distribution, shelf space, and volume share across the country, with mid-single-digit percentage growth in points of distribution and approximately 30,000 Shopper First Shelf resets [24] - The company has achieved approximately $445 million in beer cost savings from fiscal year 2024 through Q1 fiscal year 2026 [25]