Constellation Brands, Inc. (NYSE:STZ) is one of the stocks in Jim Cramer’s game plan for this week. Cramer started his game plan with the stock, as he remarked: “Monday, Constellation Brands, STZ, reports. The company has fallen out of grace along with the rest of the alcohol plays. CEO Bill Newlands acknowledged on the last earnings call that the company is being impacted by ICE raids in popular shopping destinations. The declining volumes has matched the decline in the stock. Constellation has been tryi ...

Financial Data and Key Metrics Changes - The company reported a decrease in top-line guidance while maintaining capital expenditure (CAPEX) guidance, indicating confidence in long-term growth despite near-term headwinds [12][14] - The beer operating margin target remains at 39% to 40%, which is considered best in class, even with some expected deleveraging [65][66] Business Line Data and Key Metrics Changes - The beer segment experienced a decline in sales volume, particularly among Hispanic consumers, attributed to macroeconomic factors and socio-economic concerns [9][10] - The wine and spirits segment showed positive growth, with brands like Kim Crawford and Meiomi contributing to a 2% increase in Q2, maintaining a strong market position [36][70] Market Data and Key Metrics Changes - The company noted significant volatility in sales, particularly in high Hispanic zip code areas, which have underperformed compared to the general market [76] - California has been identified as a major challenge, with expectations for construction opportunities to potentially improve beer sales in the region [77] Company Strategy and Development Direction - The company is focused on maintaining marketing investments to drive long-term growth, despite current economic challenges [25][26] - There is an emphasis on price pack architecture to cater to consumers with varying financial capabilities, ensuring accessibility to products across different price points [44][60] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about hitting the bottom of the current sales decline, while acknowledging unprecedented volatility in the market [76] - The company remains committed to investing in brand loyalty and marketing, particularly targeting younger consumers like Gen Z [10][25] Other Important Information - The company has achieved $105 million in cost savings year-to-date, with ongoing efforts to optimize operations and logistics [48] - Tariff impacts are expected to be around $70 million for the beer business and $20 million for the wine business, tracking with volume changes [53] Q&A Session Summary Question: Volume growth and consumer sentiment - Management highlighted that 80% of consumers are concerned about the socio-economic environment, impacting engagement and volume growth [9][10] Question: CAPEX guidance rationale - The company plans to maintain CAPEX to support long-term growth, despite short-term challenges [12][14] Question: Brand loyalty for Corona and Modelo - Management noted increased loyalty for Corona and Modelo, with specific brands within the portfolio performing well [18][19] Question: Impact of macro factors on beer category - Management believes macro factors are more significant than structural issues, although cannabis and health trends are acknowledged as potential influences [23][24] Question: Beer margin and cost savings - The company reported $65 million in cost savings for Q2, with ongoing initiatives to enhance operational efficiency [47][48] Question: Pricing strategy in light of economic challenges - The company expects to maintain a 1-2% pricing increase, adjusting strategies based on market conditions [72][73] Question: Inventory levels and destocking - Inventory levels are reported to be in a good position, with no significant destocking issues anticipated [70][71]

Financial Data and Key Metrics Changes - The company reported a decrease in top-line guidance last month but maintained its CAPEX guidance, indicating a commitment to long-term growth despite near-term headwinds [10][12] - The beer operating margin target remains at 39% to 40%, which is considered best in class, even with some deleveraging expected [58][60] Business Line Data and Key Metrics Changes - The beer segment experienced a drop in sales volume, particularly among Hispanic consumers, attributed to macroeconomic factors and socio-economic concerns [6][9] - The wine and spirits segment showed a 2% increase in Q2, driven by brands like Kim Crawford and Meiomi, indicating a strong performance in the market [32][64] Market Data and Key Metrics Changes - Consumer sentiment remains low, with 80% of surveyed consumers expressing concerns about the socio-economic environment, impacting overall sales volume [7][9] - The company noted significant differences in performance across various markets, with high Hispanic zip code areas showing worse results compared to the general market [69] Company Strategy and Development Direction - The company is focused on maintaining marketing investments to drive long-term growth, despite current economic challenges [22][23] - There is an emphasis on price pack architecture to cater to consumers with varying financial capabilities, ensuring accessibility to products [39][55] Management's Comments on Operating Environment and Future Outlook - Management believes that the current challenges are primarily cyclical and expects a return to traditional growth profiles as socio-economic conditions improve [23][60] - The company is cautiously optimistic about hitting the bottom of the current market volatility, with a focus on monitoring trends closely [70] Other Important Information - The company has achieved $105 million in cost savings year-to-date, with ongoing efforts to optimize operations and logistics [43] - Tariff impacts are expected to be around $70 million for the beer business and $20 million for the wine business this year [48] Q&A Session Summary Question: Volume growth and consumer sentiment - Management acknowledged the impact of socio-economic concerns on consumer behavior, particularly among Hispanic consumers, and noted increased loyalty for brands like Corona and Modelo [6][7] Question: CAPEX guidance rationale - The company explained that CAPEX for FY2026 remains unchanged due to long-term commitments, while future CAPEX adjustments will be considered based on market conditions [10][12] Question: Beer margin and cost savings - Management highlighted $65 million in cost savings for Q2 and discussed ongoing efforts to enhance operational efficiency [42][43] Question: Brand loyalty and performance - The company provided insights into brand health metrics, indicating that while Corona Extra faced challenges, the broader Corona family performed well, particularly with Corona Familiar [15][16] Question: Pricing strategy and market conditions - Management reiterated the expectation of a 1% to 2% pricing increase, emphasizing a market-by-market approach to pricing strategies [66][67] Question: Inventory levels and depletions - The company confirmed that inventory levels are in a good position and expressed confidence in aligning shipments and depletions moving forward [36][64]

Core Viewpoint - Constellation Brands has lowered its full-year sales and profit outlook due to declining demand from Hispanic consumers, who represent a significant portion of its business [1][2]. Sales and Profit Outlook - The company now expects net sales of beer to decline between 2% and 4% in its fiscal 2026, a shift from a previous forecast of up to a 3% increase [7][9]. - Adjusted earnings per share are now projected to be between $11.30 and $11.60, down from an earlier forecast of $12.60 to $12.90 [7]. Consumer Behavior - Constellation's President and CEO Bill Newlands noted that U.S. purchases of high-end beers have decreased, with consumers making fewer trips to buy beer and spending less per trip [1][6]. - The trend of reduced spending is particularly pronounced among Hispanic consumers, who account for about half of Constellation's business [2][6]. Market Context - The company has been licensed to sell Modelo and Corona in the U.S. since 2013, following AB InBev's acquisition of Grupo Modelo [3]. - Concerns among Hispanic consumers include rising prices for food and essentials, immigration issues, and job market stability, which have contributed to reduced spending on various categories, including beer [5][6]. Stock Performance - Following the announcement of the revised outlook, Constellation's shares fell more than 7% in afternoon trading [8].

Group 1: Market Trends - The consumer staples sector has seen a rotation into defensive sectors, with consumer staples (0.71%), real estate (1.16%), and healthcare (3.16%) leading the market in the past week [1] - Inflows into defensive sectors may indicate the strength of the current market rally, suggesting it spans all sectors [2] Group 2: Constellation Brands Overview - Constellation Brands, a global alcoholic beverage producer, has seen significant investment from Berkshire Hathaway, which increased its stake to 13.4 million shares valued at $2.210 billion [3][7] - The global alcoholic beverage industry was valued at $1.762 billion in 2024 and is projected to reach $3.015 trillion by 2030, with a CAGR of 9.7% [5] Group 3: Financial Performance - Constellation Brands reported a consolidated net income of $523.8 million for FY 2026 Q1, a significant improvement from a loss of $370.6 million in Q4 2025 [11] - The company's free cash flow increased from $879.7 million in FY 2018 to $1.973 billion in FY 2025, representing a growth of 124.28% [11] Group 4: Stock Performance and Valuation - Constellation Brands' stock is currently trading at a forward P/E multiple of 13.00, indicating it is undervalued [12] - The stock has potential upside of 18.29% in the near term, with a 12-month price target of $213.74, nearly 30% higher than its current trading price [15]

Core Viewpoint - Constellation Brands and Altria are both considered stable blue chip stocks, but Altria has outperformed Constellation significantly over the past three years, raising questions about future investment potential [1][2]. Constellation Brands - Constellation Brands generates most of its revenue from its beer business, with popular brands like Modelo and Corona, and a smaller portion from wine and spirits [4]. - The company faces three major challenges: declining beer consumption among younger consumers, decreasing sales of lower-end wines, and increased costs due to tariffs on imported Mexican beers [5][6]. - Analysts expect Constellation's revenue to decline from $10.2 billion in 2024 to $9.9 billion in 2027, while its earnings per share (EPS) is projected to grow at a compound annual growth rate (CAGR) of 7% [8]. - Despite a low valuation at 14 times forward earnings and a forward yield of 2.5%, the lack of near-term catalysts makes it an unappealing investment [9]. Altria - Altria primarily generates revenue from its Marlboro cigarettes and has a strong domestic focus, which protects it from tariffs and foreign-exchange issues [10][11]. - The company has been countering declining smoking rates by raising cigarette prices, cutting costs, and expanding its smokeless product portfolio through investments and acquisitions [12]. - Following a setback with its investment in Juul, Altria acquired Njoy for $2.8 billion in 2023, which is expected to boost EPS starting in 2026 [13]. - Analysts predict Altria's revenue will dip slightly from $20.4 billion in 2024 to $20.2 billion in 2027, but its EPS is expected to grow at a steady CAGR of 5% from 2025 to 2027 [14][15]. - Altria's stock is considered cheap at 12 times forward earnings, with a substantial forward yield of nearly 7%, making it a more stable investment compared to Constellation [15]. Investment Recommendation - Altria is viewed as the better investment option due to its more stable business model, larger dividend, and lower valuation multiple compared to Constellation Brands [16].

Core Insights - Constellation Brands, Inc. (STZ) is a significant player in the alcoholic beverage industry, focusing on premiumization, brand strength, and portfolio optimization as key growth strategies [1][4] - The company has a diverse portfolio of leading brands, including Modelo Especial, Corona Extra, and Robert Mondavi Winery, positioning it well to meet changing consumer preferences [1] Beer Segment - STZ is concentrating on high-performing core brands in the beer category, which constitutes approximately 83% of total sales [2] - The company is benefiting from favorable trends in the U.S. beer market, particularly the increasing demand for Mexican imports and premium beers, with Modelo being the top-selling beer in the U.S. [2] - For fiscal 2026, STZ anticipates sales growth of 0-3% in the beer segment [2][10] Wine and Spirits Segment - The wine and spirits portfolio is shifting towards higher-end offerings, with brands like The Prisoner and Kim Crawford driving growth [3] - STZ is investing in innovation and omnichannel capabilities to engage younger consumers, while divesting lower-performing assets to enhance margins [3] Competitive Landscape - A comparison with peers such as Anheuser-Busch InBev (BUD), Boston Beer Company (SAM), and Molson Coors (TAP) reveals a focus on premiumization and brand development across the industry [5] - BUD is leveraging consumer demand for its premium beer offerings, while SAM is diversifying into "Beyond Beer" products [6][7] - Molson Coors is also pursuing growth through innovation and premiumization strategies [8] Financial Performance - STZ's forward price-to-earnings ratio is 12.34X, lower than the industry average of 15.23X, indicating potential valuation opportunities [11] - The Zacks Consensus Estimate for STZ's fiscal 2026 earnings suggests a year-over-year decline of 7.9%, with a projected growth of 8.5% for fiscal 2027 [12]

Core Viewpoint - Constellation Brands has successfully completed the divestiture of its mainstream wine brands to The Wine Group, allowing the company to focus on a premium wine portfolio that aligns with consumer trends towards premiumization [1][3]. Group 1: Transaction Details - The divestiture includes mainstream wine brands such as Woodbridge, Meiomi, Robert Mondavi Private Selection, Cook's, SIMI, and J. Rogét sparkling wine, along with associated inventory, facilities, and vineyards [1]. - The retained portfolio consists of high-end wines priced predominantly at $15 and above, featuring brands like Robert Mondavi Winery, Schrader, Double Diamond, and Kim Crawford, among others [2]. Group 2: Strategic Focus - The company aims to reposition its portfolio to focus exclusively on higher-end products, which is expected to enhance performance in this segment over time [3]. - Constellation Brands emphasizes its commitment to aligning with consumer-led premiumization trends, which is anticipated to drive improved business performance [3]. Group 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 is recognized for its dedication to building beloved brands and has become one of the fastest-growing large consumer packaged goods companies in the U.S. retail market [4].

Core Viewpoint - Constellation Brands, Inc. will report its financial results for the first quarter ending May 31, 2025, on July 1, 2025, with a conference call scheduled for July 2, 2025, to discuss the results and future outlook [1][2]. 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 [3]. - The company's mission focuses on building beloved brands and enhancing human connections, which drives its growth as one of the fastest-growing large consumer packaged goods (CPG) companies in the U.S. [3]. Product Portfolio - The company offers a range of high-end, iconic imported beer brands, including Corona Extra, Modelo Especial, and various craft spirits and fine wine brands such as The Prisoner Wine Company and Robert Mondavi Winery [4]. Sustainability and ESG Strategy - Constellation Brands emphasizes sustainable and responsible operations, integrating its Environmental, Social, and Governance (ESG) strategy into its business practices to support long-term goals [5].

Core Viewpoint - Constellation Brands, Inc. will participate in the 2025 Deutsche Bank Global Consumer Conference, discussing financial metrics, operating performance, strategic initiatives, and future outlook [1]. 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 [3]. - The company's mission focuses on building beloved brands and enhancing human connections, which drives its growth as one of the fastest-growing large consumer packaged goods companies in the U.S. [3]. Product Portfolio - The company offers a range of high-end imported beer brands, including Corona Extra, Modelo Especial, and various craft spirits and fine wines such as The Prisoner Wine Company and Robert Mondavi Winery [4]. Sustainability and ESG Strategy - Constellation Brands emphasizes sustainable and responsible operations, integrating its ESG strategy into its business practices to promote environmental stewardship and responsible alcohol consumption [5].