Constellation Brands(US:STZ) Sou Hu Cai Jing·2026-02-07 10:37Core Insights - Constellation Brands reported a dramatic turnaround in Q2 FY2026, achieving a net profit of $466 million compared to a loss of $1.2 billion in the same period last year, despite a 15% decline in net sales to $2.481 billion [1][2]. Financial Performance - Net sales decreased by 15% to $2.481 billion, primarily due to declines in the wine and spirits segments [2]. - Operating profit improved significantly to $874 million from a loss of $1.229 billion in the previous year, driven by cost control and asset divestiture [2]. - Net profit reached $466 million, reversing from a net loss of $1.2 billion, with earnings per share (EPS) rising from -$5.86 to $2.17 [2]. Business Segmentation - Beer business generated $2.345 billion in net sales, down 12%, but accounted for 94.5% of total revenue, with strong demand for brands like Corona and Modelo in the U.S. market [3]. - Wine and spirits segment saw a drastic decline in net sales to $136 million, a 47% drop, which was the main reason for the overall sales decline [3]. Strategic Adjustments - The company has focused on divesting non-core assets, selling approximately 30 low-end wine brands for $2.65 billion to E.&J. Gallo, allowing a shift towards high-end wine and spirits [4]. - The beer segment, while experiencing a sales decline, managed to offset some losses through a 3% price increase and a shift towards higher-end products [5]. - Selling, general, and administrative expenses decreased by 22% due to reduced spending after asset divestitures, alongside improved supply chain and logistics efficiency [6]. Challenges Ahead - The wine business is facing a steep decline, with its revenue share dropping from 15% to 5%, and the transition to high-end products has yet to show results [7]. - The spirits segment remains small and lacks competitive strength compared to larger players like Diageo and Brown-Forman [7]. - The beer market is experiencing slower growth, and future expansion may depend on emerging markets, which carry risks related to tariffs and currency fluctuations [7]. Future Outlook - Management is cautiously optimistic for FY2026, projecting a mid-single-digit decline in net sales and a mid-single-digit increase in operating profit [8]. - EPS target is set between $8.50 and $9.00, a significant increase from $7.20 in FY2025 [8]. Strategic Focus - Accelerating high-end product offerings in the wine sector and utilizing data-driven marketing strategies [9]. - Expanding ready-to-drink channels to cater to home consumption trends [9]. - Increasing investments in emerging markets like Mexico and Brazil to replicate U.S. market success [9]. Industry Comparison - Compared to peers, Constellation Brands appears to be lagging in its transformation efforts, with a heavy reliance on its beer business, which constitutes over 90% of its revenue [11]. - Competitors like Diageo and Brown-Forman have stronger positions in the spirits market, while Constellation's wine and spirits segments have not yet developed into significant growth drivers [11].