Constellation Brands, Inc. (STZ) 10-Q 2026: AI Summary

Full summary

The Print

Constellation Brands reported Second Quarter 2027 net sales of $2,633.0M (up 6% YoY) and net income attributable to CBI of $565.8M (up 21% YoY), while operating income declined 8% to $805.0M.

Net sales increased 6% to $2,633.0M from $2,481.0M, which management attributes to 5.5% and 15.4% shipment volume growth within the Beer and Wine and Spirits segments, respectively. Operating income decreased 8% to $805.0M from $874.0M, primarily due to Second Quarter 2027 asset impairment and related expenses, higher marketing spend, and unfavorable short-term incentive accruals, partially offset by shipment volume growth, lower tariff costs, and efficiency and cost optimization initiatives. Net income attributable to CBI increased 21% to $565.8M, primarily due to a lower provision for income taxes.

Net sales rose 6% to $2,633.0M, driven by 5.5% Beer shipment volume growth and 15.4% Wine and Spirits shipment volume growth.
Net income attributable to CBI increased 21% to $565.8M and diluted EPS rose 25% to $3.32, primarily due to a lower provision for income taxes.
Operating income decreased 8% to $805.0M, primarily due to Second Quarter 2027 asset impairment and related expenses, higher marketing spend, and unfavorable short-term incentive accruals.
The effective tax rate for Second Quarter 2027 was 20.2% versus 37.9% in the prior-year quarter.

Results That Matter

Net sales
Current period
$2.6B
Prior period
$2.5B
Change
+6.1%
Management attributes the increase primarily to 5.5% and 15.4% shipment volume growth within the Beer and Wine and Spirits segments, respectively.
Gross profit
Current period
$1.4B
Prior period
$1.3B
Change
+6.3%
Gross profit as a percent of net sales increased to 52.9% from 52.8%, led by rate growth from lower cost of product sold within the Beer and Wine and Spirits segments, partially offset by an unfavorable change in Comparable Adjustments and unfavorable product mix shift within the Beer segment.
Operating income
Current period
$805.0M
Prior period
$874.0M
Change
−7.9%
Management attributes the decrease primarily to Second Quarter 2027 asset impairment and related expenses, higher marketing spend, and unfavorable short-term incentive accruals, partially offset by shipment volume growth, lower tariff costs, and efficiency and cost optimization initiatives.
Net income attributable to CBI
Current period
$565.8M
Prior period
$466.0M
Change
—
Management attributes the increase primarily to a lower provision for income taxes and shipment volume growth, partially offset by asset impairment and related expenses, higher marketing spend, and unfavorable short-term incentive accruals.
Net income (loss) per common share attributable to CBI - diluted
Current period
$3.32
Prior period
$2.65
Change
+25.3%
Diluted EPS increased 25%, exceeding the 21% increase in net income attributable to CBI, with weighted average diluted shares declining to 170.601 million from 175.938 million.

Financial highlights: current period, prior period, change, and investor takeaway per metric
Metric	Current Period	Prior Period	Change	Investor Takeaway
Net sales	$2.6B	$2.5B	+6.1%	Management attributes the increase primarily to 5.5% and 15.4% shipment volume growth within the Beer and Wine and Spirits segments, respectively.
Gross profit	$1.4B	$1.3B	+6.3%	Gross profit as a percent of net sales increased to 52.9% from 52.8%, led by rate growth from lower cost of product sold within the Beer and Wine and Spirits segments, partially offset by an unfavorable change in Comparable Adjustments and unfavorable product mix shift within the Beer segment.
Operating income	$805.0M	$874.0M	−7.9%	Management attributes the decrease primarily to Second Quarter 2027 asset impairment and related expenses, higher marketing spend, and unfavorable short-term incentive accruals, partially offset by shipment volume growth, lower tariff costs, and efficiency and cost optimization initiatives.
Net income attributable to CBI	$565.8M	$466.0M	—	Management attributes the increase primarily to a lower provision for income taxes and shipment volume growth, partially offset by asset impairment and related expenses, higher marketing spend, and unfavorable short-term incentive accruals.
Net income (loss) per common share attributable to CBI - diluted	$3.32	$2.65	+25.3%	Diluted EPS increased 25%, exceeding the 21% increase in net income attributable to CBI, with weighted average diluted shares declining to 170.601 million from 175.938 million.

What changed

Quarter over quarter, against the 10-Q for the quarter ended May 31, 2026.

Prior 10-Q

Revenue up 6.1%; Net income up 21.4%

Metric	Prior	Current	Change	Read as
Revenue	$2.5B	$2.6B	+6.1%	Favorable
Net income	$466.0M	$565.8M	+21.4%	Favorable

Revenue+6.1%
Prior $2.5B, current $2.6BFavorable
Net income+21.4%
Prior $466.0M, current $565.8MFavorable

▲ and ▼ show the direction of each change. Color and “Read as” show whether that direction is usually favorable for the metric.

Earnings Quality & Cash Conversion

Second Quarter 2027 operating income of $805.0M includes $91.6M of Comparable Adjustments, comprising $49.8M of asset impairment and related expenses, $26.6M of selling, general, and administrative expense adjustments, and $15.2M of cost of product sold adjustments. Second Quarter 2026 operating income of $874.0M included $12.2M of Comparable Adjustments. The filing reports comparable operating income of $896.6M for Second Quarter 2027 versus $886.2M for Second Quarter 2026.

Red flag

Second Quarter 2027 asset impairment and related expenses of $49.8M reflect a net loss on assets held for sale associated with the planned Nelson's Green Brier divestiture, where assets with a $54.8M carrying value were adjusted to an estimated fair value of $5.0M.

Red flag

Net cash provided by operating activities decreased $10.7M to $1,478.6M for Six Months 2027, with the change in operating assets and liabilities shifting $91.9M unfavorably, largely driven by lower Wine and Spirits accounts receivable due to lower net sales and higher income tax payments.

Value Drivers & Capital Allocation

Period net income attributable to the parent / period-end equity, not annualized: 6.6%; period net income attributable to the parent / period-end assets, not annualized: 2.6%.

Forward Signals

cautious

The filing states that the company now expects its reported effective tax rate for Fiscal 2027 to be in the range of 11% to 13%, including an estimated income tax benefit of approximately $100 million to $150 million to be recognized during the three months ending November 30, 2026. The filing also states that commercial production at the Veracruz Brewery is now expected to commence at the beginning of Fiscal 2028.

Known trends

Various tariffs and other actions negatively impacted our results of operations for Fiscal 2026 and are expected to continue to have a negative impact for Fiscal 2027.
We expect shipment volume to decline during the second half of Fiscal 2027 as we continue to progress against mutually agreed-upon finished goods inventory reductions with key distributors.
We expect $128.7 million of net gains, net of income tax effect, to be reclassified from AOCI to our results of operations within the next 12 months.

Subsequent events

In October 2026, we acquired the SpikedAde business, a spirit-based RTD beverage brand, including inventory and trademarks, for an initial purchase price of $75 million.
On September 18, 2026, we redeemed $600.0 million aggregate principal amount of 4.35% May 2022 Senior Notes prior to maturity using commercial paper borrowings at a redemption price equal to 100% of the outstanding principal amount plus accrued and unpaid interest.
As a result of certain foreign tax reform enacted in September 2026, we expect to release a portion of our valuation allowance related to deferred tax assets. We are estimating an income tax benefit of approximately $100 million to $150 million to be recognized during the three months ending November 30, 2026.

“We now expect our reported effective tax rate for Fiscal 2027 to be in the range of 11% to 13%.”
— Constellation Brands, Inc. (MD&A)

“We now expect commercial production at the Veracruz Brewery to commence at the beginning of Fiscal 2028.”
— Constellation Brands, Inc. (MD&A)

Risks

Excerpts are the filing’s own words; each heading is the start of its excerpt. Selected excerpts are not a complete risk inventory.

Various tariffs and other actions negatively impacted our results of operations for Fiscal 2026…
Various tariffs and other actions negatively impacted our results of operations for Fiscal 2026 and are expected to continue to have a negative impact for Fiscal 2027.
On September 17, 2025, the Company and the other defendants filed a motion to dismiss the amended…
On September 17, 2025, the Company and the other defendants filed a motion to dismiss the amended complaint. Oral argument on that motion was held on July 22, 2026, and the motion to dismiss remains pending.
As of August 31, 2026, under our 2025 Credit Agreement, the minimum interest coverage ratio was 2.5x…
As of August 31, 2026, under our 2025 Credit Agreement, the minimum interest coverage ratio was 2.5x and the maximum net leverage ratio was 4.0x.
Based on this analysis and activities performed in response to the legislation, there…
Based on this analysis and activities performed in response to the legislation, there will be a negative impact on our effective tax rate for Fiscal 2027, primarily driven by modifications to the taxation of foreign earnings and other international income tax provisions.

4 of 4 excerpts located in the filing text

Segments

Segment	Revenue	Operating Income	Revenue Change	Commentary
Beer	$2.5B	$964.2M	+5.5%	Management attributes the net sales increase to shipment volume growth, as distributors sought to rebuild inventory days-on-hand, and favorable pricing in select markets, partially offset by unfavorable product mix primarily from a shift in package types; depletions declined 0.6%.
Wine and Spirits	$159.4M	$6.1M	+17.2%	Management attributes the net sales increase primarily to branded wine and spirits shipment volume growth and favorable product mix, with shipment volume growth benefiting from strategic pricing actions taken on select brands in the U.S. wholesale channel; depletions rose 10.2%.

Balance Sheet & Liquidity

Leverage: Identified debt as of 2026-08-31 (carrying amount): long-term debt including current maturities of $10.2B; noncurrent long-term debt of $9.1B; current portion of long-term debt of $1.1B; short-term borrowings of $116.5M. The reported scopes overlap; no non-overlapping subtotal is established. Total debt, net debt and debt-to-equity are therefore not stated.

Liquidity: Cash and cash equivalents were $98.5M as of August 31, 2026, with remaining borrowing capacity under the 2025 Credit Agreement revolving credit facility of $2,122.6M at August 31, 2026 and $1,632.1M at September 30, 2026.

Working capital: Current assets $3.0B vs. current liabilities $3.0B (current ratio 1.00x). Prior reported balance sheet as of 2026-02-28: $2.9B vs. $2.7B (1.08x).

Maturities & covenants

As of August 31, 2026, the required principal repayments under long-term debt obligations for the remaining six months of Fiscal 2027 and for each of the five succeeding fiscal years and thereafter total $10,261.6M, including $1,803.1M in Fiscal 2028.
As of August 31, 2026, under our 2025 Credit Agreement, the minimum interest coverage ratio was 2.5x and the maximum net leverage ratio was 4.0x.
As of August 31, 2026, we were in compliance with our covenants under our 2025 Credit Agreement and our indentures, and have met all debt payment obligations.

Notable Footnotes

Item	Impact
Asset impairment on planned Nelson's Green Brier divestiture	Assets held for sale with a $54.8M carrying value were adjusted to an estimated fair value of $5.0M, less costs to sell, resulting in a $49.8M net loss included in asset impairment and related expenses.
2025 Restructuring Initiative costs	The initiative is estimated to result in $130M of cumulative pre-tax costs once all phases are fully implemented; $5.5M of pre-tax restructuring costs were recognized in Six Months 2027 and $127.4M cumulative since inception.
Subsequent event - foreign tax reform valuation allowance release	An estimated income tax benefit of approximately $100M to $150M is expected to be recognized during the three months ending November 30, 2026.
Derivative instruments - expected AOCI reclassification	The company expects $128.7M of net gains, net of income tax effect, to be reclassified from AOCI to results of operations within the next 12 months.

Ask STZ’s 10-Q anything

Get plain-English answers, each cited to the exact filing text. Try a starter question:

AI-generated. Informational only, not investment advice. May be incomplete or contain errors. The authoritative source is always the original SEC filing.