Constellation Brands Beats Q2 Estimates on Beer Shipments as Depletions Slip; Keeps FY2027 EPS Outlook

Constellation Brands (STZ) reported fiscal second-quarter 2027 results after the close on Oct 6, with net sales of $2.63 billion, up 6.1%, against a Zacks consensus of $2.57 billion. Comparable EPS was $3.74 versus the $3.62 estimate. Reported EPS was $3.32, up 25% from $2.65, according to the company's release.

Beer supplied most of the sales increase. Beer net sales were $2.47 billion, up 5.5%. The company's release shows beer shipments rose 5.5% while depletions, the pace at which distributors sell to retailers, fell 0.6%, and management said distributors ordered to rebuild inventory to healthier levels. Modelo Especial depletions fell about 2% and Corona Extra about 5%, partly offset by Pacifico, Victoria and Modelo Chelada, and pricing net of mix was roughly flat. Wine and spirits net sales rose 17% to $159.4 million, a small base next to beer, and its operating margin was 3.8% versus 39.0% for beer.

Margins moved the wrong way. The company's release says beer operating margin fell 160 bps to 39.0% as increased marketing investment and other SG&A spend outweighed lower tariff expenses and fixed cost absorption, and enterprise comparable operating margin fell 160 bps to 34.1%. Comparable EPS rose only 3%, from $3.63.

For fiscal 2027, the company left its comparable EPS outlook unchanged at $11.20 - $11.90, which MarketBeat called broadly in line with a $11.74 consensus. It raised its reported EPS outlook to $11.85 - $12.55 from $11.50 - $12.20 and guided organic net sales between negative 1% and positive 1%. The 11.6% one-month share decline cited by Zacks predates the report. Investing.com reported shares down 4.9% in pre-market trading on Oct 7, citing the reaffirmed guidance and the beer depletion figure. Investors may watch beer depletion trends, third-quarter marketing spending, which management expects above 11% of net sales, and the second-half beer operating margin target of 34.5% to 35.5%.