Abstract

Constellation Brands, an American alcohol giant, will announce its first quarter results for fiscal year 26 after the market closes on July 1, 2025. It is worth noting that Berkshire Hathaway bought 5.62 million shares of Constellation Brands in the fourth quarter of 2024, and increased its holdings by 6.38 million shares in the first quarter of 2025, with a market value of US$2.2 billion. As a Buffett holding, Constellation Brands' performance has attracted more market attention.

Founded in 1945 and headquartered in New York, Constellation Brands is the second largest beer company in the United States, owning world-renowned beer brands such as Corona and Modelo.

Review of last quarter

In the fourth quarter of fiscal year 2025, Constellation Brands' earnings per share were $2.63, higher than $2.30 in the same period last year and higher than the expected $2.28; sales were $2.164 billion, exceeding the expected $2.12 billion.

Looking ahead, Constellation Brands expects earnings per share to be between $12.60 and $12.90 in fiscal year 2026, lower than the market's general expectation of $13.94. Net sales growth in fiscal year 2026 is expected to be in the range of -2% to 1%, and the growth forecast for fiscal years 2027-2028 has been lowered to 0% to 3%.

FY2025 revenue

Market Forecast

According to Bloomberg data, the market generally expects Constellation Brands to have sales of $2.545 billion in the first quarter of fiscal year 26, with adjusted comparable US stock earnings of $3.31. It is expected that beer sales in the first quarter will decrease by 2.55% year-on-year, and wine and spirits sales will decrease by 18.76% year-on-year.

Previously, management has repeatedly emphasized the synergy between product upgrades and supply chain efficiency improvements, with particular attention to the combined impact on revenue growth and profit margins. The proportion of mature businesses in the company's total revenue has steadily increased over the past year, supporting overall performance and providing flexibility for more subsequent innovative attempts.

Key points

Product upgrades and sales channel diversification

Management is enriching product lines from multiple angles to continuously expand coverage of subdivided areas. In past fiscal quarters, core products have contributed stable cash flow to the company and established consumer loyalty. Taste upgrades and channel diversification in response to the needs of young consumer groups have added new ideas for the company to establish closer user relationships. Funding investment in product research and development, packaging upgrades and market promotion will lower overall profit margins, but will be beneficial to overall performance improvement in the long run.

Promotion of new products

The company has previously gradually divested some inefficient brands or businesses, freeing up more resources to develop products with higher profit margins and greater market potential. Data from recent quarters show that new products are beginning to show increasing flexibility. If the penetration rate in the segmented population can achieve a breakthrough, the proportion of revenue in the overall revenue will also rise, which may bring more structurally favorable profit opportunities to Constellation Brands.

Seize the opportunity of the peak sales season

The increase in personnel and marketing expenses will put pressure on profits in the short term, but it is expected to bring long-term earnings growth. The peak of seasonal demand will gradually arrive in the middle and late stages of the fiscal year. If the main products can seize the window period of the peak sales season, the profit margin will also be repaired upward.

Goldman Sachs' view

In early June, Goldman Sachs released a research report on the US beer market, believing that the challenging macroeconomic environment is the biggest factor affecting beer sales. Consumers have less disposable income and give priority to buying non-essential items. In addition, recent policy changes (such as immigration policies) and adverse weather conditions have also had an impact on beer consumption.

Considering the severe macroeconomic environment, Goldman Sachs adopts a selective strategy to find the most potential targets for outstanding performance. Based on this, Goldman Sachs reiterated its "buy" rating on Constellation Brands as the distributor cited some potentially positive signs in the company's monthly volume trends (at least accelerating in May).