This was no time for crying in your beer.
Constellation Brands (STZ) CEO Bill Newlands faced analysts on July 1 after the beer, wine and spirits company missed Wall Street’s first-quarter earnings and revenue expectations.
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“I think it’s important to point out that the quarter was as we expected,” Newlands said during the company’s earnings call. “We saw a significant amount of consumer concern that has continued from the past quarters into this quarter. But this quarter was as we expected.”
The Rochester, NY-based company generates roughly 80% of its revenue from beer sales, primarily through Mexican beer imports like Corona and Modelo.
Beer sales slipped 2% for the quarter, the company said, driven by a 3.3% decline in shipment volumes “reflecting socioeconomic headwinds affecting consumer demand.”
Constellation Brands
Constellation CEO: Hispanic consumers are half company’s business
RBC analyst Nik Modi asked about concerns related to the company’s Hispanic customers, in light of the Trump Administration’s stepped up efforts on deportation and border security.
“It almost feels like it’s getting a bit worse in terms of just at least from the headlines of the raids and where they’re targeting consumers in normal places of shopping,” Modi said. “Do you have any perspective from the administration in terms of when some of these raids will start to calm down?”
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“First and foremost, our loyalty is very strong and remains very strong with the Hispanic consumer base,” Newlands responded. “Both Hispanic and non Hispanic consumers are concerned about inflation and about cost structure.”
Hispanic consumers, reflects roughly half the company’s business, he said, “and that consumer is very interested in beer.”
“What has occurred is that occasions on which beer is consumed have decreased because of concerns of the socioeconomic area,” Newlands said in response to another question.
“When we look at the fact that consumers are not going out to eat as much as they had, they’re having less social occasions at home, it doesn’t change their interest in consumption of beer,” he added. “It simply has been that those occasions have been decreased.”
Americans overall say they will cutting back on alcohol, according to survey released in January by advertising and sales measurement technology firm NCSolutions.
Forty-nine percent of the respondents said they intend to drink less in 2025 – up from 41% a year earlier, with Generation Z, or adults ages 18 to 28, leading the way.
The company reaffirmed its forecast for fiscal 2026, although Chief Financial Officer Garth Hankinson acknowledged that “there are still some macroeconomic factors…that we continue to monitor and there continues to be some uncertainty in the macro backdrop.”
Analyst cites solid balance sheet
“We’ve seen from our banking partners and from the Fed some reductions in expectations around GDP growth as well as some softening in expectations with inflation, unemployment and interest rates,” he said.
“That being said,” Hankinson added, “there’s a lot of guesswork, I think, more so in this year’s forecast as it relates to things like the impact of potential tariffs or the potential impact of tariffs and the potential impact of unemployment of government related layoffs.”
Related: Corona beer owner raises red flag about alarming consumer trend
Constellation Brands are down 23% this year, and the stock is down nearly 34% from this time in 2024
Jefferies upgraded Constellation Brands to buy from hold on July 7 with a price target of $205, up from $194, according to The Fly.
Hispanics are drinking less beer, but this won’t last forever, and Constellation’s compares are easing at an accelerating pace, the firm said.
Jefferies said the company’s “solid” balance sheet provide it time while the stock’s valuation is “too cheap.”
On July 1, UBS raised the firm’s price target on Constellation Brands to $205 from $195 and kept a buy rating on the shares.
Constellation Brands reported a tough start to fiscal 2026, but maintained their outlook for the year, the firm said.
Despite a choppy near-term set-up, UBS said that it still sees a path to low-single digit top line and mid-single digit bottom line growth over the long-term.
And Citi raised the firm’s price target on Constellation Brands to $174 from $170 and kept a neutral rating on the shares.
Constellation posted “a soft start” to FY26, but reiterated its FY26 guidance, which drove a positive stock reaction given negative positioning and several investors having expected a cut, the firm said.
Despite easier comps in July and August, the firm believes a return to growth “looks challenging given weakness in the category,” Citi said.
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