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Constellation Stock Is Struggling. Earnings Beat May Not Turn Things Around.

Oct 06, 2025 04:00:00 -0400 by Evie Liu | #Consumer #Earnings Preview

Constellation Brands distributes Modelo and Corona in the U.S. (Photo by Justin Sullivan/Getty Images)

Key Points

Shares of Constellation Brands rose on Monday after the market close as the U.S. distributor of Corona and Modelo beers posted fiscal second-quarter earnings that beat Wall Street’s expectations.

For the three months ended in August, the alcohol and beverage company reported $3.63 in comparable earnings per share, down 16% from a year ago, while sales declined 15% from the year-ago quarter to $2.48 billion.

Analysts polled by FactSet expected the firm to report earnings of $3.38 per share and sales of $2.46 billion. The stock rose 3.3% in after-hour trading. Still, prior to the earnings report, shares were down 36% this year.

Alcohol is out of vogue. Many beer, wine, and spirit companies are having a rough time as consumers—especially Gen Z and younger millennials—cut back on alcohol due to rising prices, health concerns, and the popularity of other recreational options.

In the second quarter, Constellation‘s beer sales decreased 7% from a year ago. Sales of wine and spirits were down by 65%, partially because the company divested some mainstream wine brands as it seeks to focus on higher-end brands priced at $15 a bottle and above. Excluding the effects of that move, the decline was 19%.

Constellation again lowered its forecast for reported earnings per share for fiscal 2026, after cutting its calls on both reported earnings and comparable earnings, a separate metric, last month. Reported EPS is now expected to come in between $9.86 and $10.16, down from the previous call for $10.77 to $11.07.

Last month, the company cut its forecast for comparable EPS to a range of $11.30 to $11.60, a notable step down from the $13.78 it achieved in fiscal 2025, the year through February. Management also slashed its sales outlook, citing weaker-than-projected demand for beer. It now sees organic net sales falling 4% to 6% in fiscal 2026.

Sales in premium beer were hit particularly hard as consumers purchase less frequently and spend less per trip, CEO Bill Newlands said when the company released its first-quarter results. This was partially due to weaker spending by Hispanic consumers, who account for half of Constellation’s consumer base for beer.

Newlands told investors earlier this year that economic concerns have led to fewer group gatherings and convenience store trips. At the same time, Hispanic communities have been hit hard by the White House’s immigration policies.

Constellation isn’t alone. In the first half of 2025, sales volumes at Budweiser maker Anheuser-Busch InBev declined 2% from a year ago, extending losses from 2023 and 2024. Beer sales at Molson Coors Beverage also dropped 1.6% in the second quarter. Shares of AB InBev and Molson Coors have declined 19% each this year, underperforming the 7.4% gain across all consumer discretionary stocks in the S&P 500 .

Alcohol companies have been expanding their portfolios to include low-alcohol alternatives such as hard seltzers, cocktail mixers, zero-alcohol beers, and nonalcoholic beverages like energy drinks and tonic water. The segment is still small, but growing quickly.

Newlands has pushed back on the decline of alcohol consumption. He said at a recent conference that 21- to 25-year-olds were overrepresented in Constellation’s sales, and that the impact of GLP-1 drugs on beer sales is negligible.

A conference call to discuss the latest results is scheduled for Tuesday before the market opens. Investors will be listening for news about Constellation’s review of its organizational structure, which is expected to bring more than $200 million in annualized cost savings by fiscal year 2028.

Write to Evie Liu at evie.liu@barrons.com