Constellation Brands (STZ) Q2 2027 earnings review
Constellation's beer sales rose, but drinkers still bought less beer
Constellation Brands, the company behind Modelo and Corona beer, sold more beer to distributors while stores bought slightly less. Sales rose 6%, mainly because distributors rebuilt stocks that Constellation had cut a year ago. Chief executive Nicholas Fink pointed to faster market-share gains. Constellation kept its full-year plan, which by our math has beer sales falling about 5% in the second half.
| Beer distributors sold on to stores | −0.6% beer shipped to distributors: +5.5% |
|---|---|
| Net sales | $2.63 billion +6% from a year ago |
| Profit per share, excluding one-offs | $3.74 +3% from a year ago |
| Full-year profit outlook | Unchanged middle of the range: $11.55, down 2% |
⚖️ Verdict: 🔴 Bearish
The story got worse, because Constellation kept its full-year plan after a strong quarter, so the months ahead now look weaker. After the first quarter, the plan pointed to slightly lower sales; now it points to a clear drop. One bright spot: the brewer keeps taking share, and its wine and spirits arm grew again.
The question now is whether stores order more of its beer once distributors stop restocking. Faster share gains could lift those orders and make the plan look cautious, or a weak shopper could keep them falling. January's third-quarter results will tell.
🐂 Bull Case
Pacifico and Victoria Lead Beer Share Gains
Constellation sells imported Mexican beers in the US, led by Modelo Especial and Corona Extra. Chief executive Nicholas Fink cited "early returns through accelerating dollar and volume share gains" after higher spending on its brands.
- Beer share in Circana-tracked US stores: up over 0.8 points, faster than in the first quarter
- Pacifico depletions, the beer distributors sell on to stores and bars: up about 19%
- Victoria depletions: up about 15%
- Modelo Especial and Corona Extra depletions: down about 2% and 5%
Pacifico and Victoria still reach far fewer shops than rival brands, so wider availability can add volume. But the beer market shrank, so total depletions still fell.
What to watch: Modelo Especial depletions in the January results. Growth there would mean the gains have reached the largest brand.
Wine and Spirits Sales Grew 17%
Constellation's wine and spirits arm sells Kim Crawford wine and Mi CAMPO tequila. It shrank after the company sold its cheaper wine brands in 2025. This quarter its sales rose 17%, and it turned a small profit.
- Depletions, sales from distributors on to stores: up 10.2%
- Mi CAMPO depletions: up about 51%
- Operating margin: 3.8%, against minus 14.6% a year ago
The comparison was easy, because depletions fell about 10% a year earlier. The margin also leaned on "recoveries of U.S. tariffs", of unstated size, and on restructuring savings.
What to watch: the wine and spirits margin in the January results. By our math the full-year plan needs about 9% in the second half. A much lower figure would mean the tariff refund carried this quarter.
Buybacks Lifted Profit per Share While Profit Stalled
Constellation buys back its own shares, so each remaining share gets a bigger slice of profit. Profit excluding one-offs stayed flat at about $637 million. Profit per share on that basis still rose 3%, to $3.74.
The share count fell 3% from a year ago, after $530 million of buybacks through September. Finance chief Garth Hankinson said the company kept its "target comparable net leverage ratio of ~3.0x", so borrowing stayed in line with earnings. But buybacks do not grow the business, and this quarter they covered for flat profit.
What to watch: the share count in the January results. A smaller decline would mean the weaker second-half cash flow in the outlook has started to limit buybacks.
Positives this quarter didn't test
Two positives from earlier quarters got no new numbers in the release or the executive commentary. Each one has a disclosure that would test it.
- Cost savings: no dollar figure for the restructuring program this quarter; a figure on the January call would show whether savings offset the higher marketing.
- Cost hedges: the company had locked in most of its aluminum, fuel and currency costs for this year; next year's cover is not yet disclosed.
🐻 Bear Case
Beer Sales Rose Because Distributors Restocked
"During the second quarter, our portfolio of iconic brands continued to resonate with consumers," chief executive Nicholas Fink said. The beer business grew sales 5% and shipped 5.5% more cases to distributors.
Sales to stores did not grow. Depletions, the beer distributors sell on to stores and bars, fell 0.6%. The company said distributors "ordered to rebuild inventory days on hand to healthier levels". A year earlier, Constellation had cut those stocks, so shipments trailed depletions by 6 to 7 percentage points.
That makes most of this quarter's gain a catch-up in stock, not new demand. The company said distributor stocks entered the third quarter in a healthier position, so the lift will not repeat. Constellation also kept its full-year beer sales plan of roughly flat. By our math, that leaves second-half beer sales about 5% lower.
What to watch: beer depletions in the third-quarter results in January. Growth there would mean store orders, not restocking, are driving beer sales again.
Higher Marketing Spending Cut the Beer Margin
Constellation is spending more to promote its beers, including World Cup and college football campaigns. The beer operating margin, the share of sales left after running costs, fell 1.6 percentage points to 39.0%.
- Marketing: about 10% of beer sales
- Marketing, overhead and other running costs: 15.1% of beer sales, up 2.8 points by our math
- Cost of making the beer: down 1.2 points of sales, on lower tariffs and higher volume
Marketing and overhead rose faster than sales, so beer operating profit grew only 1%. The company plans marketing above 11% of beer sales in the third quarter, when volumes are seasonally lower.
What to watch: the third-quarter beer margin in January. A margin close to last year's would mean the extra spending buys share without shrinking profit.
Constellation Held Beer Prices Flat for Weaker Shoppers
When he set this year's plan, finance chief Garth Hankinson counted on beer prices rising 1% to 2%. This quarter, prices and product mix took about $2 million off beer sales instead.
The company said it stayed "selective with pricing actions on a market-by-market basis" because shoppers feel squeezed. Depletions, the beer distributors sell on to stores and bars, fell 1.5% in shops. Shops carry about 89% of volume.
Bars and restaurants grew 6.6%, helped by the World Cup. The company described "a temporary deceleration in depletion trends" in August, and said Texas and Florida lagged.
What to watch: prices and mix in the January beer sales breakdown. A second flat reading would mean the price rise in this year's plan has gone.
Risks this quarter didn't answer
Five standing concerns got no new figures, or no change in the outlook, in this quarter's materials. Each one has a disclosure that would settle it.
- Hispanic shoppers: no sales figure for heavily Hispanic areas; the company said only that its appeal to them stays the highest among big brewers.
- Return to a 39–40% beer margin: no timeline; any year named for it would move the case.
- Veracruz brewery: no start-up cost for the new Mexican brewery; a cost and timing figure would settle it.
- Capital spending after this year: no plan yet; the fiscal 2028 outlook will show whether spending stays lower.
- Wine and spirits weakness: sales grew again, but the full-year plan still has them flat; January will show whether distributor cuts erase the gain.
👓 Other Themes
Constellation Bought SpikedAde After the Quarter
After the quarter ended, Constellation bought SpikedAde, a spirit-based ready-to-drink brand, for $75 million upfront. It may pay up to $278 million more over five years. The company said the deal "strengthens our position in the fast-growing RTD category". The outlook excludes it. Constellation also took a $50 million charge on its plan to sell the Nelson's Green Brier business.
💲 Other KPIs
Spending on breweries and equipment fell to 6.7% of sales, from 8.8% a year ago. It has dropped for two quarters after topping 11% last winter. By our math, the roughly $800 million plan leaves about $446 million for the second half. That is slightly below last year's second half.
Borrowings minus cash fell 2.4% from a year ago, to about $10.2 billion by our math. The total has edged down since February. Debt due within a year rose to $1.1 billion, from $604 million in February, so refinancing comes into view.
Head-office costs rose 62% from a year ago, to $74 million. The company said higher pay and benefits, including short-term bonuses, drove the rise. Hankinson had said lower bonuses held down costs last year, so part of this increase reverses that.
🔮 Guidance
Unchanged. The plan still has profit per share excluding one-offs at about $11.55, down 2% from last year. First-half profit per share rose 5%. By our math, the second half falls about 12%, to roughly $4.39. Constellation has held this range through three updates, so the stronger first half did not lift the year.
Raised. The middle of the range now sits about 27% above last year. It is the second raise in a row: +$0.40, then +$0.35. Tax drives it, through a $1.10 per-share benefit from a tax accounting adjustment. The raise does not reflect better business results.
Unchanged. The plan has sales from businesses owned a year ago roughly flat. First-half sales on that basis rose 4%. By our math, the second half falls about 5%. Constellation left the year unchanged after a stronger first half, which moves the expected weakness into the next six months.
Unchanged. The plan has beer sales roughly flat for the year. By our math, that leaves second-half beer sales down about 5%. Across the range, the decline runs from 2.5% to 7%. After the first quarter, the same plan implied a drop of under 1% for the rest of the year.
Unchanged. The plan has wine and spirits sales roughly flat, excluding the brands sold in 2025. First-half sales on that basis rose 12%. By our math, the second half falls about 8%. The company said distributors will cut their stocks of finished wine and spirits in that period.
Unchanged. The plan keeps operating margin excluding one-offs at 32% to 33%. The first half reached 34.2%. By our math, the second half sits near 30%. Operating profit on that basis falls about 7% from last year's second half.
Cut by 1 percentage point. The reported range now sits below the version that excludes one-offs. The gap reflects about $90 million of one-off items in the year. A $68 million charge on assets the company plans to sell is the largest.
Unchanged. The company expects a beer margin of 34.5% to 35.5% in the second half. That sits well below the first half's 39.0%. By our math, it is also below last year's second half of about 35.8%. Seasonally lower volume and marketing above 10% of sales drive the drop.
Unchanged. The plan has the wine and spirits margin at 5% to 6% for the year. The first half reached only 1.6%. By our math, the second half needs about 9%. That is close to last year's second half.
Cut. The reported tax rate falls to about 12%, from about 17% three months ago. A tax accounting adjustment explains the drop. The rate excluding one-offs stays near 20%, close to this quarter's 20.4%.
Unchanged. First-half operating cash flow reached $1.48 billion. By our math, the plan leaves about $0.97 billion for the second half. That is below last year's second half of about $1.18 billion.
Unchanged. Spending on breweries and equipment stays near $800 million for the year, down from $875 million last year. The company continues capacity work at its Mexican breweries, including the new Veracruz site.
Unchanged. Free cash flow, the cash left after capital spending, reached $1.12 billion in the first half. By our math, the plan leaves about $0.53 billion for the second half. That is about 26% less than a year earlier. Higher payments of accrued bills already weighed on the first half.
❓ Key Questions
How much beer restocking by distributors is left?
Shipments ran about six points ahead of depletions this quarter. The gap Constellation expects for the second half shows how much of the planned sales decline is payback.
What beer price rise does the plan now assume?
The plan counted on prices rising 1% to 2% this year, but prices and mix added nothing this quarter. The answer decides whether flat volume can still mean higher sales.
How large was the wine tariff refund?
The wine and spirits margin turned positive partly on recoveries of US tariffs. Without the dollar amount, readers cannot tell how much of the improvement will repeat.
What did September depletions show after August slowed?
The company called August's weaker store sales temporary. A September figure would test that claim before the third quarter closes.
When does the Veracruz brewery start adding costs?
Constellation named the new brewery as a margin headwind when it set this year's plan. The timing and size of those costs shape next year's beer margin.