Street Calls of the Week
Investing.com -- Constellation Brands (NYSE:STZ) stock fell 8% Tuesday morning after the beverage alcohol company significantly lowered its fiscal 2026 earnings guidance, citing challenging macroeconomic conditions affecting consumer demand.
The company revised its comparable earnings per share outlook to $11.30-$11.60, well below its previous forecast of $12.60-$12.90 and analysts’ expectations of $12.66. Constellation also updated its enterprise organic net sales projection, now expecting a decline of 4%-6% compared to its prior outlook of a 2% decline to 1% growth.
The beer segment, which includes popular brands like Corona and Modelo, is now forecast to see net sales decline 2%-4%, a sharp reversal from the previously expected 0%-3% growth. Beer operating income is projected to fall 7%-9%, compared to earlier expectations of 0%-2% growth.
Constellation attributed the downward revisions to "incremental macroeconomic headwinds affecting consumer demand" and noted that high-end beer buy rates have decelerated in recent months as both trip frequency and spend per trip declined. The company specifically highlighted that Hispanic consumers, a key demographic for its beer business, showed more pronounced declines in high-end beer purchases than the general market.
"We continue to navigate a challenging macroeconomic environment that has dampened consumer demand and led to more volatile consumer purchasing behavior since our first quarter of fiscal 2026," said Constellation Brands President and CEO Bill Newlands.
The company also lowered its free cash flow guidance to $1.3-$1.4 billion from $1.5-$1.6 billion previously. For the second quarter, Constellation expects inventory rebalancing at the distributor level to occur earlier than typical, resulting in shipments trailing depletions by 6.0-7.0 points.
Despite the challenges, Constellation maintained that through July, it grew volume share in 49 of 50 states and remained the top dollar share gainer in the total U.S. beer category.