Core Insights - Constellation Brands, Inc. will participate in the 2025 Barclays Global Consumer Staples Conference on September 2, 2025, where executives will discuss 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 diverse range of products, including high-end imported beers like Corona Extra and Modelo Especial, a variety of wines such as The Prisoner Wine Company and Robert Mondavi Winery, and craft spirits like Casa Noble Tequila and High West Whiskey [4] Sustainability and ESG Strategy - Constellation Brands emphasizes sustainable and responsible operations, integrating its Environmental, Social, and Governance (ESG) strategy into its business practices [5] - The company aims to be a good steward of the environment, invest in communities, and promote responsible beverage alcohol consumption, aligning these goals with its long-term business strategy [5]

Core Viewpoint - Constellation Brands reported disappointing Q1 fiscal 2026 results, with both sales and earnings missing estimates, primarily due to weak consumer demand influenced by socioeconomic factors [3][4]. Financial Performance - Comparable earnings per share (EPS) for Q1 were $3.22, down 10% year over year, missing the Zacks Consensus Estimate of $3.38. Reported EPS was $2.90, a 39% decline year over year [4]. - Net sales fell 5.5% year over year to $2.52 billion, also missing the Zacks Consensus Estimate of $2.57 billion [4]. - The beer segment's sales decreased 2% year over year to $2.23 billion, with a shipment volume decline of 3.3% [5]. - The wine and spirits segment saw a significant sales drop of 28% year over year to $280.5 million, driven by a 30.4% decline in shipment volumes [6]. Margin Analysis - Comparable operating income was $810 million, down 11% from the prior year, attributed to declines in both beer and wine & spirits segments [7]. - Operating income for the beer segment fell 5% year over year to $873.4 million, with an operating margin contraction of 150 basis points to 39.1% due to increased costs [8]. - The wine and spirits segment reported an operating loss of $6 million, a significant decline from an operating income of $59.7 million in the previous year [9]. Financial Position - As of May 31, 2025, cash and cash equivalents were $73.9 million, long-term debt was $9.8 billion, and total shareholders' equity was $7.3 billion [10]. - The company generated an operating cash flow of $637.2 million and an adjusted free cash flow of $444.4 million for Q1 [10][11]. Future Outlook - Constellation Brands 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 [12]. - The company anticipates organic net sales for fiscal 2026 to range from a decline of 2% to an increase of 1%, with the beer segment expected to grow 0-3% and the wine and spirits segment to decline 17-20% [13]. - Comparable EPS guidance for fiscal 2026 is set at $12.60-$12.90, with reported EPS expected to be $12.07-$12.37 [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 Viewpoint - Constellation Brands, a major player in the beer industry, is facing challenges but has potential for long-term growth, particularly due to demographic shifts and significant investment from Warren Buffett [1][8]. Financial Performance - Constellation Brands reported a 5.5% drop in total revenue last quarter, attributed to industry-wide beer sales declining by 4.7% and specific pressures on its Hispanic consumer base [3][4]. - The company missed expectations on both sales and adjusted earnings per share (EPS), yet maintained its full-year adjusted EPS guidance for fiscal 2026, which positively influenced analysts' price targets [4]. Market Position and Analyst Sentiment - Constellation's beer sales only declined by 2%, indicating a gain in market share despite overall industry softness [3]. - Analysts have raised their price targets for Constellation, with a consensus target of approximately $215, suggesting a potential upside of over 25% from the current price of $169.31 [5][6]. - The average updated price target after the latest earnings report is $191, indicating a more modest upside of around 12% [6]. Investment Insights - Warren Buffett's investment strategy reflects a bullish outlook on Constellation, having increased his holdings significantly, which suggests confidence in the company's long-term value [5][9]. - Demographic trends indicate that the Latino and Hispanic population in the U.S. is expected to grow significantly from 2030 to 2060, providing a structural tailwind for Constellation's business [8][9].

Group 1: Constellation Brands - Constellation Brands is the top seller and importer of three major imported beers in the U.S.: Modelo, Pacifico, and Corona [3] - The company has faced recent sales weakness due to macroeconomic issues, but it generates sufficient earnings to support growing dividends, with a forward dividend yield of 2.37% [4][5] - Constellation has been increasing its dividend since 2015 and aims to save over $200 million annually by fiscal 2028, which is expected to lead to more earnings and dividend increases for shareholders [6] - Despite a decline in stock price, Constellation's beer business gained market share, making the current dip a potential buying opportunity [7] - The forward price-to-earnings multiple is currently at 13.6, with management guiding for adjusted earnings per share between $12.60 to $12.90 [8] Group 2: Home Depot - Home Depot is the world's largest home improvement retailer with 2,350 stores across multiple regions, and it has experienced soft sales recently [9] - The stock offers an attractive forward yield of 2.48%, and if interest rates decrease, the stock could surge to new highs [9][10] - Home Depot has a long-term growth trend supported by increasing household net worth, with a $10,000 investment 20 years ago now worth $107,000, or $176,000 with dividend reinvestment [11] - The company has paid dividends for 38 consecutive years, covering 61% of earnings in dividends, and recently raised its quarterly dividend by 2% to $2.30 [12] - Home Depot generates $162 billion in annual sales and targets a $1 trillion addressable market in home improvement, indicating strong growth potential [12]

Financial Data and Key Metrics Changes - The company affirmed its full-year beer revenue growth outlook despite industry weakness observed in May and June, indicating confidence in achieving guidance [10][12] - The first quarter was described as normal, with a depletion decline similar to the previous quarter, and the company expects sequential improvement as it moves into easier comparisons [11][12] - The impact of incremental tariffs is projected to be around $20 million, with a 20 basis point hit to margins, but the company believes it can still deliver margins in line with previous guidance [14] Business Line Data and Key Metrics Changes - The company is focused on maintaining strong brand health metrics and loyalty among consumers, particularly within the Hispanic demographic, which constitutes a significant portion of its business [19][20] - Marketing investments were higher in Q1 due to seasonality, with a focus on high-impact events to strengthen brand presence [27][28] - The introduction of new products like SunBrew and adjustments in pricing strategies are aimed at capturing market share in the high-end light beer segment [33][57] Market Data and Key Metrics Changes - The company reported high single-digit share gains in the market, indicating a positive trend in brand performance despite overall market challenges [21][52] - The competitive landscape has intensified, with increased marketing activities from competitors, particularly in the high-end light beer category [25][57] - The company is seeing a consistent percentage of alcohol in consumer baskets, despite overall basket sizes shrinking due to economic concerns [20] Company Strategy and Development Direction - The company is committed to controlling its controllables, focusing on distribution and price pack architecture to adapt to consumer spending behaviors [52][54] - There is an ongoing emphasis on innovation, with new product introductions expected to contribute significantly to growth [33] - The company is exploring opportunities for diversification in its portfolio, particularly in the non-alcoholic sector, which has gained traction since the last investor day [32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic uncertainties, including inflation and unemployment, but expressed confidence in the brand's resilience and consumer loyalty [12][13] - The company anticipates a return to more normal consumer behavior as socioeconomic conditions improve, particularly for its Hispanic consumer base [40][41] - The rebuilding efforts following California wildfires are expected to provide a long-term tailwind, although short-term challenges remain due to macroeconomic factors [61][63] Other Important Information - The company has implemented a robust hedging policy to manage currency and commodity risks, particularly concerning the peso [47][49] - The management highlighted the importance of maintaining strong relationships with consumers and adapting to their changing needs in the current economic climate [20][54] Q&A Session Summary Question: Confidence in beer revenue growth outlook and margin guidance - Management confirmed confidence in the unchanged full-year beer revenue growth outlook, noting that the quarter was as expected despite consumer concerns [10][12] Question: Impact of socioeconomic factors on consumer behavior - Management indicated that while occasions for beer consumption have decreased, interest in beer remains strong among consumers, suggesting a potential return to normalcy [40][41] Question: Marketing strategy and competitive landscape - Management discussed increased marketing investments and the competitive landscape, emphasizing the strength of their brands and loyalty among consumers [25][27] Question: Pricing environment in beer - Management acknowledged additional price promotions in the market and indicated adjustments in their pricing strategy to capture share in the high-end light beer segment [57] Question: Rebuilding after California wildfires - Management noted that rebuilding efforts would create job opportunities and potentially boost beer consumption, with this upside factored into their guidance [61][63]

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]

Core Viewpoint - Constellation Brands reported quarterly earnings and revenue that fell short of analysts' expectations, primarily due to the impact of tariffs on aluminum, yet the company remains confident in its fiscal 2026 forecast despite these challenges [1][2]. Financial Performance - The company reported a fiscal first-quarter net income of $516.1 million, or $2.90 per share, a decrease from $877 million, or $4.78 per share, a year earlier [3]. - Adjusted earnings per share were $3.22, slightly below the expected $3.31, while net sales dropped 5.8% to $2.52 billion, compared to the expected $2.55 billion [6]. Impact of Tariffs - The report reflects the beginning of President Trump's tariffs on canned beer imports in early April, alongside increased trade duties on aluminum, which rose to 25% in mid-March and 50% in early June [4]. - Both imported beer and aluminum are vital to Constellation's beer business, which constitutes approximately 80% of the company's overall revenue [5]. Market Reaction - Following the earnings report, shares of Constellation Brands fell more than 1% in extended trading, with the stock having lost over 20% of its value this year due to concerns regarding the impact of higher tariffs on beer demand [2].

Core Viewpoint - Constellation Brands, Inc. is expected to report declines in both revenue and earnings for the first quarter of fiscal 2026, with earnings estimated at $3.34 per share, reflecting a 6.4% decrease year-over-year, and revenues projected at $2.6 billion, indicating a 3.5% decline from the previous year [1][2]. Financial Performance Expectations - The Zacks Consensus Estimate for earnings per share is $3.34, down 6.4% from the same quarter last year, with a 1.5% downward revision in the past week [2] - Revenue expectations are set at $2.6 billion, which is a 3.5% decline compared to the prior-year quarter [2] - The company experienced a negative earnings surprise of 15.4% in the last reported quarter, but has historically beaten estimates by an average of 5.2% over the last four quarters [2] Earnings Prediction Model - The current model does not predict an earnings beat for Constellation Brands, with an Earnings ESP of -1.64% and a Zacks Rank of 3 (Hold) [3] Segment Performance Insights - The beer segment is expected to show resilience, benefiting from cost-saving measures and efficiency initiatives, with growth driven by brands like Modelo Especial and Corona Extra [4] - The wine and spirits segment returned to growth in the fourth quarter of fiscal 2025, with expected sales growth supported by increased shipment volumes and a favorable product mix [5] - Premiumization strategies and capacity expansion in Mexico are contributing positively to the beer segment's performance [6] Market Environment and Challenges - The company faces inflationary pressures, including higher packaging and raw material costs, which are impacting margins [7] - The operating environment is challenging due to cautious consumer spending and potential tariff changes, which may further affect profitability [8] Valuation Perspective - Constellation Brands is trading at a forward price-to-earnings ratio of 12.38X, which is below its five-year high of 23.57X and the industry average of 15.27X, indicating an attractive investment opportunity [9][10] - The stock has declined by 37.1% over the past year, compared to an 8.8% decline in the industry [11]

Market Overview - The market has recovered most of its losses from earlier in the quarter, finishing strong despite initial turbulence caused by President Trump's trade policies [1][2] - The upcoming week is expected to be shortened, following a quarter that started poorly but ended on a high note, emphasizing the importance of maintaining a steady investment approach [2] Company Insights - Constellation Brands is expected to report disappointing earnings, reflecting broader challenges in the consumer packaged goods sector [4] - The company faces headwinds from the rise of GLP-1 weight loss drugs and increasing consumer preference for cannabis, which are negatively impacting alcohol sales [4] - Constellation Brands' sales are particularly affected by Trump's immigration policies, as approximately half of its beer sales come from Hispanic consumers who are now spending less due to concerns over employment [4] Economic Indicators - The Chicago Purchasing Managers' Index will be released, serving as a key indicator of the industrial economy's health, with potential implications for Federal Reserve interest rate decisions [3] - Mortgage application figures are anticipated, which have been described as a significant burden on the economy [5] - The labor report set to be released on Thursday is critical; weak data could lead to renewed criticism of Fed Chair Jerome Powell and raise the possibility of a rate cut in July [5]