Constellation Brands: Beer Growth and Buybacks Mask Stock's Slump

Key Points

• Constellation Brands topped revenue expectations but missed on adjusted EPS in its fiscal 2027 first-quarter report, even as the stock trades near multi-year lows.
• The beer segment, led by Modelo Especial and Corona Extra, kept growing while Wine and Spirits posted strong organic sales gains despite a large reported decline tied to a divestiture.
• New CEO Nicholas Fink outlined an occasion-based growth strategy as the company continued returning cash to shareholders through buybacks and dividends amid raised full-year guidance.

Constellation Brands NYSE: STZ delivered its fiscal year 2027 Q1 report on June 30 with mixed results. Revenue of $2.43 billion beat expectations for $2.39 billion. However, Constellation missed the bottom line, reporting adjusted earnings per share (EPS) of $3.43, below expectations of $3.70.

However, the earnings figure was higher year over year (YOY). Plus, management raised its full-year reported EPS outlook to $11.50 to $12.20 and reaffirmed comparable guidance of $11.20 to $11.90. At the midpoint, the reported EPS would be 23% higher YOY.

That hasn’t done much to satisfy investors. As of the market close on July 8, STZ continues to trade near multi-year lows around $130, keeping shares below their 200-day moving average of roughly $146, and the stock's MACD remains in negative territory.

When it comes to earnings reports, investors often pay too much attention to what the company did and not enough to its future outlook. In the case of Constellation Brands, that’s a disconnect that’s worth examining. Particularly, as STZ is trading approximately 29% below the analysts’ consensus price target of $167.89.

Constellation's Beer Business Continues to Drive Growth

Constellation's beer segment, anchored by Modelo Especial and Corona Extra, grew net sales 2% on a 1.8% increase in shipment volumes. Operating margin held roughly flat at 39%. Depletions, a measure of what's actually moving off store shelves, dipped by a modest 0.3%. The company remained the top dollar-share gainer in the U.S. beer category during the quarter, with five of the 15 top share-gaining brands nationally.

Wine and Spirits told a more complicated story. Reported net sales fell 47%, but that decline is almost entirely a function of last year's divestiture of a large chunk of the mainstream wine portfolio. Strip that out, and organic net sales actually grew 8%, with depletions up 6.6%. The Kim Crawford brand’s depletions grew by roughly 4%, while Mi CAMPO Tequila surged 62%. The segment's operating loss narrowed sharply, improving 140 basis points to a margin of negative 0.7%.

Constellation Challenges the GLP-1 Bear Case

A popular bear thesis for beer and wine stocks holds that GLP-1 weight-loss drugs are suppressing overall drinking. Constellation's numbers argue against that story, at least for now. If GLP-1 adoption were driving a broad pullback in alcohol consumption, beer volumes should be falling alongside wine and spirits. Instead, beer shipments grew, and organic sales and depletions for wine and spirits both increased.

This suggests that Constellation Brands is adjusting to the changing tastes of consumers. That's different from a company stuck in a doom loop of declining consumer demand.

What shows up in the numbers is lower pressure on the income ladder. Management described a "discerning and value-conscious consumer mindset," particularly among lower-income households, as gas prices rose more than 50% nationally during the quarter.

That's the K-shaped economy playing out in real time: a bifurcated consumer base, with higher-end brands with strong equity, like Modelo and Kim Crawford, continuing to find buyers even as lower-income households pull back elsewhere.

Constellation Rewards Shareholders With Buybacks and Dividends

Constellation returned over $400 million to shareholders during the quarter. That was split between $324 million in year-to-date share repurchases and a quarterly dividend of $1.03 per share. Management is targeting a comparable net leverage ratio of approximately 3x while continuing to fund the construction of a third brewery in Veracruz, Mexico. Operating cash flow rose 4% to $662 million, and free cash flow increased 9% to $485 million.

New CEO Nicholas Fink Outlines Constellation's Growth Strategy

This was the first earnings report with Nicholas Fink as President and Chief Executive Officer (CEO). Fink used the earnings commentary to lay out an occasion-based growth strategy. The plan centers on understanding when, where, and why consumers choose specific brands, rather than treating growth purely as a distribution or pricing exercise.

Fink singled out Modelo Especial's continued distribution runway and relatively low brand awareness as a specific opportunity, alongside continued investment in fast-growing Pacifico and Mi CAMPO.

Constellation Stock Offers Value for Patient Investors

At roughly 11x, Constellation trades at a discount that looks reasonable for a defensive consumer name with a dominant beer franchise and an improving wine-and-spirits business. The stock's continued technical weakness suggests the market hasn't fully priced in the operating improvement yet.

To be fair, risks remain. Wine and Spirits still operates near breakeven, tariff exposure on agricultural inputs is an ongoing concern the company flags directly in its filings, and the broader beverage alcohol category faces real questions about long-term consumption trends.

But this quarter's results suggest the pressure so far is more about consumer selectivity than a structural retreat from alcohol altogether. For patient investors, Constellation's combination of earnings growth, aggressive capital returns, and a still-skeptical stock chart is worth watching closely.