Modelo and Corona brewer Constellation Brands is a tale of two businesses. One of them — beer — is stealing market share left and right. The other — wine and spirits — is an anchor on the stock. Nothing in the company’s fiscal 2025 second-quarter results on Thursday changed that narrative. But the next two quarters might. Comparable net sales for the three months ended Aug. 31 rose 3% year over year to $2.92 billion, essentially in line with the $2.9 billion expected, according to estimates compiled by LSEG. Adjusted earnings per share (EPS) of $4.32 topped estimates of $4.08, LSEG data showed. Constellation Brands Why we own it : Constellation Brands’ beer franchise, which includes popular Mexican brands Modelo, Corona and Pacifico, is the growth engine and by far the most attractive part of the business. We continue to urge Constellation to concentrate on beer and divest its struggling wine-and-spirits unit. Competitors : Anheuser-Busch Inbev and Molson Coors Weight in Club portfolio : 2.74% Most recent buy : July 29, 2024 Initiated: May 5, 2022 Bottom line Constellation Brands delivered no real surprises Thursday — but that was to be expected after the Mexican beer importer revised its full-year guidance a month ago due largely to steeper declines in wine and spirits than previously expected. The range for full-year growth expectations for beer was moderated slightly — to 7% at the midpoint from 8%. Investors greeted that revised guidance in early September with a sigh of relief. That’s because third-party data sources were signaling a cruel summer for the beverage category as a whole, which led analysts to lower their estimates before Constellation said anything. Now investors were greeting Thursday’s results with some selling. Shares fell roughly 4% on Thursday, after climbing more than 6% from Aug. 30 — the session before the outlook change — through Wednesday’s close. The S & P 500 advanced just 1% over the same stretch. In its fiscal second quarter, Constellation’s portfolio of imported Mexican beers continued to grow, albeit at slightly slower pace than the market has become to expect. Sales were up 6% from a year ago, compared with year-over-year gains of 8%, 11% and 11.8% in its three prior quarters. We don’t see the near-term moderation as a cause for concern. For starters, Constellation’s customers are facing the same macroeconomic pressures weighing on all consumer-facing companies right now. In fact, Constellation is feeling it in a distinct way due to its sizable exposure to Hispanic consumers at a time when the Hispanic unemployment rate is above the national average . Another reason is that demand trends are improving, CEO Bill Newlands asserted on the post-earnings call — pointing to third-party scanner numbers in recent weeks that are not reflected in Thursday’s reported results. “We don’t see this as any radical change in the long-term perspective on the business. It is purely a near-term issue,”…
Read More: Modelo brewer Constellation falls despite an earnings beat. Here’s why