• Beer Net Sales Growth Rate: Expected to be between 0% to 3% for fiscal 26 and 2% to 4% for fiscal 27 and 28.
• Operating Income Growth Rate: Expected to be between 0% to 2% for fiscal 26.
• Operating Margins: Expected to be approximately 39% to 40% for fiscal 27 to 28.
• Comparable EPS Growth: Achieved double-digit growth in fiscal 25.
• Net Annualized Cost Savings: Expected to yield over $200 million by fiscal 28 from restructuring actions.
• Operating Cash Flow: Targeting approximately $9 billion from fiscal 26 to 28.
• Free Cash Flow: Targeting approximately $6 billion from fiscal 26 to 28.
• Dividend Payout Ratio: 30% as part of capital deployment framework.
• Share Repurchases: Executing against a new three-year $4 billion authorization.

• Warning! GuruFocus has detected 6 Warning Signs with CGECF.

Release Date: April 10, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Constellation Brands Inc (NYSE:STZ) delivered enterprise net sales growth, substantial comparable operating margin improvement, and double-digit comparable EPS growth in fiscal 25 despite a challenging socioeconomic environment.
• The company expects significant improvements in the performance of its Wine & Spirits business beyond fiscal 26, following the anticipated closing of the 2025 wine divestitures transaction.
• Constellation Brands Inc (NYSE:STZ) is targeting approximately $9 billion in operating cash flow and $6 billion in free cash flow from fiscal 26 to 28, with investments in brewery development in Veracruz and modular additions in Mexico.
• The company remains committed to a disciplined capital deployment framework, including a 30% dividend payout ratio and executing share repurchases against a new three-year $4 billion authorization.
• Constellation Brands Inc (NYSE:STZ) maintains strong brand health metrics, with significant increases in aided awareness and consideration for brands like Modelo, Corona, and Pacifico.

Negative Points

• The company expects beer net sales growth to slow, with projections of 0% to 3% for fiscal 26 and 2% to 4% for fiscal 27 and 28, down from previous expectations.
• Tariffs announced by the US and Canadian governments are expected to impact the beer and wine businesses, particularly affecting aluminum cans and imports from New Zealand and Italy.
• The Hispanic consumer, a significant demographic for Constellation Brands Inc (NYSE:STZ), is facing economic pressures, leading to reduced spending on social gatherings and beer consumption.
• The company has revised its long-term beer sales growth expectations from 7% to 9% down to 2% to 4% for fiscal 27 and 28, reflecting a more conservative outlook due to macroeconomic uncertainties.
• Constellation Brands Inc (NYSE:STZ) faces challenges in predicting consumer sentiment recovery, which is crucial for the company's growth projections and overall industry performance.

Q & A Highlights

Q: Can you provide more details on the impact of tariffs on your beer business, particularly regarding USMCA compliance and aluminum cans? A: William Newlands, CEO: We have been USMCA compliant since its implementation and remain so today. Garth Hankinson, CFO: Our guidance includes the impact of tariffs announced by the US and Canadian governments, affecting our aluminum cans and wine brands from New Zealand and Italy. We anticipate these factors will stabilize over time, especially as the Hispanic consumer returns to normal spending patterns.

Q: How are you approaching the revised long-term beer sales growth forecast, and what factors are influencing this outlook? A: William Newlands, CEO: Our brand health remains strong, and we focus on distribution, innovation, and execution. The revised forecast reflects uncertainties, including tariffs and Hispanic consumer concerns. We expect loyalty to our brands to drive long-term growth, despite current socioeconomic challenges.

Q: What are the main drivers for maintaining best-in-class beer margins despite expected volume slowdowns and tariff risks? A: Garth Hankinson, CFO: We will manage our footprint modularly to limit depreciation impacts, maintain 1% to 2% pricing, and continue cost-saving initiatives. These efforts, combined with volume growth, will help us sustain margins of 39% to 40%.

Q: How are you planning to deploy free cash flow, and are you considering larger acquisitions given the repositioning of your Wine & Spirits business? A: Garth Hankinson, CFO: We plan to generate $9 billion in operating cash flow and $6 billion in free cash flow through FY28. Our priorities include maintaining a 30% dividend payout, executing a $4 billion share repurchase authorization, and investing in our beer business. M&A remains a lower priority, focused on smaller opportunities.

Q: Can you elaborate on the socioeconomic factors affecting the Hispanic consumer and how they impact your business? A: William Newlands, CEO: Many Hispanic consumers are concerned about higher prices, immigration issues, and job losses, leading to reduced spending on social gatherings and restaurants. This impacts our beer business, particularly for brands like Modelo, which has a significant Hispanic consumer base. We believe these are nonstructural issues that will moderate over time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.