Constellation Brands Reports Q3 Earnings: Beer Strength Can't Offset Wine and Spirits Drag

Constellation Brands, the beverage alcohol giant behind Corona, Modelo, and a portfolio of premium wine and spirits brands, reported fiscal third quarter 2026 results after market close on Wednesday that painted a picture of a company navigating divergent market forces.

The company's beer business—anchored by the wildly popular Modelo Especial and Corona Extra brands—continued to demonstrate remarkable strength in an otherwise challenging consumer environment. However, the wine and spirits segment remained a drag on overall performance, reflecting broader industry trends and the company's ongoing strategic divestitures.

The Numbers at a Glance

Wall Street analysts had set expectations for adjusted earnings of $2.64 to $2.66 per share, representing an 18% decline from the year-ago quarter. The consensus revenue estimate pointed to net sales in line with seasonal patterns but reflecting the structural changes in the company's portfolio.

The beer segment, which accounts for roughly 80% of operating profits, was expected to deliver another quarter of solid execution. Modelo Especial has now held the title of America's top-selling beer brand for over a year, a position once thought unassailable for Bud Light before its dramatic market share loss in 2023.

Beer: The Crown Jewel Continues to Shine

Constellation's beer portfolio represents one of the most remarkable success stories in American consumer goods over the past decade. When the company acquired the rights to Modelo and Corona from Anheuser-Busch InBev in 2013 (a condition of the AB InBev-Grupo Modelo merger), few could have predicted the transformation that would follow.

Today, Modelo Especial alone generates more revenue than many mid-cap consumer goods companies. The brand has proven resilient across economic cycles, appealing to both Hispanic consumers—its traditional base—and an increasingly broad mainstream audience attracted to its authentic positioning and premium-but-accessible price point.

"The strength of our beer portfolio continues to demonstrate the power of authentic brands with clear consumer value propositions in an increasingly fragmented beverage landscape."

— Bill Newlands, President and CEO, Constellation Brands

Wine and Spirits: The Strategic Overhaul Continues

The wine and spirits segment tells a different story—one of strategic contraction rather than expansion. Over the past several years, Constellation has systematically divested lower-margin wine brands to focus on premium offerings and its powerhouse beer business.

The SVEDKA vodka divestiture and the 2025 wine brand sales have materially reduced segment revenue, making year-over-year comparisons challenging to interpret. These moves are intentional, designed to improve overall portfolio quality and capital allocation efficiency.

However, even the remaining premium wine and spirits portfolio faces headwinds. Consumer preferences have shifted toward ready-to-drink cocktails, premium spirits, and non-alcoholic alternatives—a trend that has pressured traditional wine consumption, particularly among younger demographics.

Cost Pressures and Brewery Expansion

Beyond the segment dynamics, Constellation faces the same inflationary pressures confronting the broader consumer goods industry. Packaging costs—particularly for aluminum cans and glass bottles—have remained elevated. Raw material costs, including barley and corn, have fluctuated but remain above pre-pandemic levels.

The company has also been investing heavily in brewery capacity to meet the seemingly insatiable demand for its Mexican beer imports. These capital expenditures, while necessary for growth, have increased depreciation expense and operating costs in the near term.

Constellation's brewery in Nava, Mexico, near the Texas border, has undergone multiple expansions and now ranks among the largest beer production facilities in North America. Additional capacity investments in Veracruz are underway, positioning the company for continued growth but requiring patience from shareholders regarding near-term margins.

Valuation and Investment Considerations

Heading into the earnings release, Constellation traded at a forward price-to-earnings ratio of approximately 11.2x, well below its five-year high of 23.6x and below the Beverages-Alcohol industry average of 15.1x. This discount reflects investor concerns about the wine and spirits segment and broader questions about consumer spending in 2026.

The average analyst price target of $170.70 implies meaningful upside from current levels around $142, suggesting that Wall Street sees value that the market has not fully recognized.

For income-focused investors, Constellation offers a modest but growing dividend, with the company having increased its payout for 10 consecutive years. The dividend yield, while not eye-catching, provides a baseline return while investors wait for the strategic transformation to yield results.

What to Watch in the Conference Call

When management hosts its conference call Thursday morning at 10:30 AM ET, investors will be listening for several key items:

• Beer depletion trends: The rate at which retailers are selling through inventory provides insight into underlying consumer demand
• Pricing power: Whether the company can continue passing through cost increases without losing volume
• Wine and spirits stabilization: Signs that the strategic restructuring is beginning to yield margin improvement
• 2026 guidance: Any updates to full-year expectations that could move the stock in either direction

The Bottom Line

Constellation Brands represents a tale of two businesses: a dominant, growing beer franchise with compelling long-term economics, and a legacy wine and spirits portfolio undergoing fundamental restructuring. The stock's current valuation suggests investors are focused on the challenges rather than the opportunities.

For patient investors willing to look past near-term noise, the combination of category-leading beer brands and a management team committed to value creation presents an intriguing opportunity. The Q3 results and subsequent guidance updates will help determine whether that patience is likely to be rewarded.