Corona Beer Maker Talks Tariff Impact, Issues Conservative Outlook

Constellation Brands Inc STZ reported fourth-quarter earnings on Wednesday. Its net sales grew 1% year over year (Y/Y) to $2.16 billion, beating the analyst consensus estimate of $2.13 billion.

Net sales for the Beer segment remained flat Y/Y at $1.70 billion, and Wine and Spirits rose 11% Y/Y to $459.8 million. Shipment volume for Beer fell 1.8% Y/Y, while Wine and Spirits rose 3.5% Y/Y.

Gross profit increased 7% year over year to $1.11 billion. The company reported an operating loss of $(150.3) million compared to operating income of $629.4 million in the same quarter a year ago.

The operating margin for the quarter was (6.9)% vs. 29.4% in the prior-year quarter.

Adjusted EPS of $2.63 beat the analyst consensus estimate of $2.28.

The company generated an operating cash flow of $3.2 billion in FY25, a 13% year-over-year increase, and a free cash flow of $1.9 billion, a 28% year-over-year growth.

Constellation Brands ended the quarter with $68.1 million in cash and equivalents as of February 28.

As of the end of fiscal 2025, Constellation Brands had around 48 million hectoliters of production capacity across its facilities in Mexico.

Dividend: Constellation's board declared a quarterly cash dividend of $1.02 per share, an increase of 1%, payable on May 15, to stockholders of record on April 29.

Buyback: The company announced a new 3-year share repurchase authorization of $4 billion.

President and CEO Bill Newlands stated, "Despite a softer consumer demand backdrop in fiscal 2025, we delivered another year of Enterprise net sales growth and substantial comparable operating margin improvement, as well as double-digit comparable EPS growth."

"Looking ahead, in a tough socioeconomic environment we are taking decisive actions designed to continue to support our industry-leading Beer Business, reset our cost base, and redefine our portfolio."

Garth Hankinson, Executive Vice President and Chief Financial Officer, added, "We remain committed to these balanced priorities as we deploy the approximately $9 billion of operating cash flow we expect to generate between fiscal 2026 and fiscal 2028, including through the use of our new total $4 billion share repurchase authorization aligned with that period."

Guidance: The company issued FY26 guidance, projecting comparable EPS of $12.60–$12.90 vs. consensus of $13.45.

The company expects enterprise organic net sales growth to be flat to 3% in the Beer segment and a decline of 17% to 20% in the Wine and Spirits segment in FY26.

Also, the company sees operating cash flow of $2.7 billion–$2.8 billion and free cash flow of $1.5 billion–$1.6 billion, including recently disclosed Wine and Spirits divestiture and restructuring actions.

The company expects EPS growth in the mid-single to low-double digits in FY27 and in the low-single to mid-single digits in FY28.

Constellation projects cumulative operating cash flow and free cash flow for fiscal 2027–2028 to exceed $6 billion and $5 billion, respectively.

For FY27-FY28, the company anticipates enterprise net sales growth of approximately 2% to 4%, with growth of 2% to 4% in Beer segment and flat to +3% in Wine and Spirits segment.

Between FY26 and FY28, the company plans to invest around $2 billion in capital expenditures, mainly to continue the modular development of its third brewery in Veracruz and expand existing sites.

By FY28, capacity in Mexico is expected to grow to about 55 million hectoliters to support anticipated demand for its high-end beer brands.

Constellation Brands states that its guidance reflects the expected impact of tariffs announced by the U.S. on April 2 and Canada on March 4.

The company also expects its restructuring actions to generate over $200 million in net annualized cost savings by FY28.

Investors can gain exposure to the stock via First Trust Nasdaq Food & Beverage ETF FTXG and Brookstone Value Stock ETF BAMV.

Price Action: STZ shares are down 0.18% to $183.07 at the last check on Thursday.

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