Key facts
- Constellation Brands' net sales rose 6% to $2.63 billion in the second quarter.
- The company's adjusted earnings were $3.74 per share, exceeding estimates.
- Constellation Brands acquired SpikedAde for a minimum of $75 million.
- The beer segment saw a 5% rise in quarterly net sales.
- The wine and spirits business reported a 17% increase in quarterly net sales.
- The company reaffirmed its fiscal 2027 forecast for adjusted earnings.
Constellation Brands exceeded second-quarter financial expectations on Tuesday, buoyed by strong demand for its beer portfolio, including popular brands like Modelo Especial and Victoria. This resilience in beer sales helped to counteract broader challenges within the alcohol industry, characterized by a soft consumer spending environment.
The company also announced a strategic move to expand its footprint in the rapidly growing ready-to-drink (RTD) beverage market with the acquisition of SpikedAde, a vodka-based RTD company. The deal is structured with an initial payment of $75 million at closing, with potential additional payments of up to $278 million over five years, contingent on SpikedAde's performance and Constellation's capital allocation priorities.
Constellation's beer business received a boost from major sporting events held this year, such as the FIFA World Cup and NBA Finals, which stimulated social gatherings and increased consumption occasions. Net sales for the quarter ending August 31 climbed 6% to $2.63 billion, surpassing the average analyst estimate of $2.54 billion. On an adjusted basis, the company reported earnings of $3.74 per share, exceeding the consensus estimate of $3.56 per share.
Looking at its segments, Constellation's wine and spirits business saw a significant 17% increase in quarterly net sales, while the beer segment posted a 5% rise. Despite these positive top-line results, the company revised its annual operating margin forecast downward to 31%-32%, from a previous projection of 32%-33%. Shares of Constellation Brands experienced a decline of 4.5% in extended trading, contributing to a year-to-date drop of approximately 16%. The company had previously withdrawn its fiscal 2028 forecast in April, citing market volatility and limited visibility.