Constellation Brands Inc. reminded investors on Wednesday why it remains one of the most resilient names in the alcoholic beverage industry, delivering third-quarter results that handily beat Wall Street expectations despite the challenging environment facing beer and spirits companies.
The Corona and Modelo parent reported earnings per share of $3.06, crushing the consensus estimate of $2.63 by $0.43. Revenue came in at $2.22 billion, topping expectations of $2.17 billion. It marked the company's fourth consecutive post-earnings stock gain—a streak that reflects management's ability to navigate a difficult consumer environment.
Pricing Power in a Pressured Market
The headline story in Constellation's quarter was margin expansion. Despite volume declines that have plagued the entire beer industry, the company managed to grow operating margins through a combination of premium pricing, cost discipline, and favorable product mix.
"What we're seeing is a classic tale of premiumization," said Kaumil Gajrawala, beverages analyst at Jefferies. "Constellation's portfolio skews heavily toward premium imports like Modelo Especial and Corona. These brands have pricing power that domestic mass-market beers simply don't have."
The numbers bear this out. While industry-wide beer volumes have declined in the low single digits, Modelo Especial continues to gain market share and now ranks as the top-selling beer in the United States—a position it has held since overtaking Bud Light in 2023.
The Modelo Machine Keeps Running
Modelo Especial's dominance is remarkable when you consider the brand's trajectory. Two decades ago, it was a niche Mexican import. Today, it accounts for a significant portion of Constellation's beer segment revenue and continues to grow even as the overall beer market contracts.
"Modelo has become the default beer for a demographic that values authenticity and quality over price. That's a powerful position in any consumer environment."
— Bill Newlands, Constellation Brands CEO
Corona, the company's other flagship brand, also performed well, particularly in its Corona Extra and Corona Premier variants. The brand has successfully positioned itself as a lifestyle product, transcending traditional beer marketing to appeal to health-conscious and experience-oriented consumers.
Wine and Spirits: The Drag Continues
Not everything in Constellation's portfolio is firing on all cylinders. The company's wine and spirits segment continues to underperform, reflecting broader category weakness and the ongoing strategic review of these assets.
Constellation has been gradually exiting lower-margin wine brands while retaining premium labels like Kim Crawford and Meiomi. The company sold its Svedka vodka brand in 2024 and continues to evaluate options for additional divestitures.
For investors, the wine and spirits segment is a sideshow. Beer generates the vast majority of Constellation's profits, and that's where management's focus—and investor attention—remains concentrated.
Fiscal 2026 Guidance Affirmed
Perhaps most importantly for investors, Constellation affirmed its fiscal 2026 earnings guidance of $11.30 to $11.60 per share, suggesting management remains confident in the business despite macro uncertainties.
The guidance implies continued margin expansion and reflects the company's expectations that its premium portfolio will continue to outperform the broader market. Analysts are now modeling for the higher end of the range, given the Q3 beat and management's confident tone on the earnings call.
The Consumer Resilience Question
One question that looms over the entire alcoholic beverage industry is whether consumers will continue to trade up to premium products as economic uncertainty persists. Constellation's Q3 results suggest the answer is yes—at least for now.
The company's core customer skews younger, more diverse, and more experience-oriented than traditional domestic beer drinkers. This demographic has shown remarkable resilience in their spending patterns, prioritizing quality over quantity even as budgets tighten.
Valuation and Investment Considerations
Constellation shares trade at approximately 17 times forward earnings, a modest premium to the broader consumer staples sector but below the multiple commanded by spirits-focused peers like Brown-Forman and Diageo.
Bulls argue the company deserves a higher multiple given Modelo's growth trajectory and the margin expansion potential in its beer business. Bears point to the wine and spirits drag, the maturing (albeit still growing) Modelo brand, and broader concerns about alcohol consumption trends among younger generations.
Looking Ahead
For income-oriented investors, Constellation offers a compelling combination of dividend growth (the company has increased its dividend for eight consecutive years) and capital appreciation potential. The 1.5% yield is modest but well-covered, with room for continued increases.
For growth investors, the story hinges on whether Modelo can continue its remarkable market share gains and whether the company can successfully exit its underperforming wine and spirits assets at attractive valuations.
Either way, Q3 demonstrated that Constellation knows how to execute in a difficult environment—a skill that never goes out of style.
