Constellation Brands' Stock Slips 1% on Q1 Earnings & Sales Miss

Core Insights - Constellation Brands, Inc. reported first-quarter fiscal 2026 results with both sales and earnings missing expectations, primarily due to weak consumer demand influenced by socioeconomic factors [1][2][3] Financial Performance - Comparable earnings per share (EPS) for the quarter were $3.22, a 10% decline year over year, missing the consensus estimate of $3.38. Reported EPS was $2.90, down 39% year over year [2][6] - Net sales decreased by 5.5% year over year to $2.52 billion, also falling short of the consensus estimate of $2.57 billion [2][6] - The beer segment's sales fell 2% year over year to $2.23 billion, with a 3.3% decline in shipment volume attributed to socioeconomic headwinds [4][6] - Wine and spirits sales plummeted 28% year over year to $280.5 million, driven by a 30.4% decline in shipment volumes and an 8.1% dip in depletions [7][6] Margin Analysis - Comparable operating income was $810 million, down 11% from the prior year, reflecting challenges in both beer and wine & spirits segments [8] - Operating income for the beer segment fell 5% year over year to $873.4 million, with operating margin contracting by 150 basis points to 39.1% due to increased costs [9] - The wine and spirits segment reported an operating loss of $6 million compared to an operating income of $59.7 million in the previous year, with significant margin contraction [10] Financial Position - As of May 31, 2025, the company had cash and cash equivalents of $73.9 million, long-term debt of $9.8 billion, and total shareholders' equity of $7.3 billion [11] - Operating cash flow for the first quarter was $637.2 million, with adjusted free cash flow at $444.4 million [11][12] Future Outlook - The company forecasts operating cash flow of $2.7-$2.8 billion and free cash flow of $1.5-$1.6 billion for fiscal 2026, with planned capital expenditures of $1.2 billion [13] - Management anticipates organic net sales for fiscal 2026 to range from a decline of 2% to an increase of 1%, with the wine and spirits segment expected to decline by 17-20% [14] - Comparable EPS guidance for fiscal 2026 is set at $12.60-$12.90, with reported EPS expected to be $12.07-$12.37 [16][17]