Latest quarter
Constellation Brands reported Q2 FY2027 revenue of $2.6 billion, up 6.13% from Q2 FY2026. The company reported revenue of $2.6 billion against consensus revenue of $2.6 billion, exceeding the consensus by 2.46% as the consensus counts it. Constellation Brands reported adjusted EPS of $3.74 against consensus adjusted EPS of $3.62, exceeding the consensus by 3.31%.
The filing said net sales increased 6%, primarily driven by shipment-volume growth of 5.5% in Beer and 15.4% in Wine and Spirits. Constellation Brands reported diluted EPS of $3.41, up 28.8% from $2.65 a year earlier, while the filing attributed higher net income in part to a lower income-tax provision and shipment-volume growth. Gross margin was 52.9%, compared with 52.8% a year earlier, while operating margin was 30.6%, compared with 35.2%. The company reported free cash flow of $644.0 million, compared with $665.6 million in Q2 FY2026.
| Q2 FY2027 | Q2 FY2026 | Change | |
|---|---|---|---|
| Revenue | $2.6 billion | $2.5 billion | 6.13% |
| Diluted EPS | $3.41 | $2.65 | 28.8% |
| Gross margin | 52.9% | 52.8% | 0.1 percentage points |
| Operating margin | 30.6% | 35.2% | −4.7 percentage points |
| Free cash flow | $644.0 million | $665.6 million | −3.25% |
| Against the consensus | Reported | Consensus | Result |
|---|---|---|---|
| Adjusted EPS | $3.74 | $3.62 | Beat by 3.31% |
| Revenue | $2.6 billion | $2.6 billion | Beat by 2.46% |
Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.
What management said on the call
Chief Executive Officer Nick Fink said Constellation spent much of the first half rebuilding distributor inventories and entered the third quarter with days on hand below the long-term average. When analysts asked whether inventory rebuilding had affected the quarter, Fink said the company had needed to close distributor order backlogs and avoid out-of-stocks, and he expected the second half to look normal relative to other years. Fink said full-year shipments and depletions should track within 99% of each other.
Fink said September showed acceleration beyond the timing effect from Labor Day, citing consumer response to college-football and other programming. He said the company expected to reach the high end of its comparable EPS guidance range if those September trends continue, while remaining prudent in its forecasts.
On pricing, Chief Financial Officer Garth Hankinson said pricing net of mix was roughly flat in Q2. Hankinson said the result reflected mix headwinds, commercial investments including distributor incentives and couponing, and the carryover from repositioning the high-end light-beer portfolio. Fink said Constellation’s long-run pricing algorithm is between 1% and 2%, and said the company could use the lower end where it sought to sharpen competitiveness.
Hankinson said Beer operating margin is expected to be 34.5% to 35.5% in the second half, when lower volume, maintenance capital expenditures, higher SG&A and brand-support spending affect margins. He said marketing is expected to be about 10.0% of net sales in the second half and above 11.0% in Q3. Hankinson also said the Veracruz site is expected to enter service in the first part of FY2028, with $75.0 million of annualized depreciation and a 0.90% annualized margin headwind.
Guidance
Constellation reiterated FY2027 comparable EPS guidance of $11.20–$11.90. Fink said the company would expect to land at the high end of that range if positive September trends continue. The company also expects FY2027 shipments and depletions to track within 99% of each other.
| Metric | For | Guide | Previous guide | Change |
|---|---|---|---|---|
| Operating expenses growth, Marketing | Q3 FY2027 | 11.0% | — | New |
| Operating expenses growth, Marketing | H2 FY2027 | 10.0% | — | New |
| Operating expenses growth, Sga | H2 FY2027 | 7.00% | — | New |
| Operating margin, Beer | H2 FY2027 | 34.5%–35.5% | — | New |
| EPS, Comparable | FY2027 | $11.20–$11.90 | — | New |
| Free cash flow | FY2027 | $1.6 billion–$1.7 billion | — | New |
| Capex | FY2027 | $800.0 million | — | New |
| Operating cash flow | FY2027 | $2.4 billion–$2.5 billion | — | New |
| Tax rate, non-GAAP | FY2027 | 20.0% | — | New |
| Tax rate, GAAP | FY2027 | 12.0% | — | New |
| Operating margin, Wine and Spirits | FY2027 | 5.00%–6.00% | — | New |
| Operating margin, Beer | FY2027 | 37.0%–38.0% | — | New |
| Operating margin, Enterprise, non Gaap | FY2027 | 32.0%–33.0% | — | New |
| Operating margin, Enterprise, gaap | FY2027 | 31.0%–32.0% | — | New |
| Revenue growth, Wine and Spirits | FY2027 | −1.00%–1.00% | — | New |
| Revenue growth, Beer | FY2027 | −1.00%–1.00% | — | New |
| Revenue growth, Enterprise | FY2027 | −1.00%–1.00% | — | New |