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Following 4 straight quarters of decline, Constellation's beer division returned to growth in its fiscal fourth qtr thru Feb 2026 across depletions (+0.6%), net sales (+1%) and shipments (+1.1%), co reported last wk. Yet even amid those improved trends, this marked the first time in 16 yrs Constellation's beer biz declined for the full fiscal yr. Recall, it was same period yr ago when Constellation's 59 qtr growth streak suddenly came to an end. Could Constellation &mdash; the consistent growth engine of recent decades &mdash; decline for a 2d straight year? Co's current -1% to +1% beer net sales guidance implies flat volumes even in the best case scenario for fiscal 2027, as pricing "will be at the lower end" of co's typical 1-2% range this year, cfo Garth Hankinson detailed. STZ also scrapped its fiscal 2028 forecast (beer net sales +2-4%) issued in Apr 2025. "Volatility has been high and visibility has been low," outgoing ceo Bill Newlands summarized on his last investor call in role, terming co's guidance "realistic" in today's "fluid" operating environment. Yet the brewer started its new fiscal year off strong as March was "better than planned." Constellation's volume grew 5% for 4 wks thru Mar 22 in Circana multi-outlet + convenience channels, where it's trending nearly 2 pts stronger than all-channel STRs lately. And STZ stock shot up ~8% on the day of the earnings call. What gives?Hispanic Headwinds "Moderated"; STZ Gaining 1 Share of $$ and Vol in 4-Wk Scans One key reason for recently improved trends: Hispanic consumer impact "moderated" in latest qtr, execs shared in separately issued ceo/cfo commentary. Softness in Hispanic-heavy areas "continued to weigh on overall portfolio performance." But the "rate of decline in those areas improved," even as gen mkt zip codes "continued to outperform on a relative basis." Hispanics still account for about 1/2 of STZ sales, more for Modelo. And improvement among that cohort was "probably most notable" on Modelo's trends in massive CA mkt, said Bill. That's "part of the reason" Constellation got back to its "more traditional share gaining position" in natl Circana scans. It added "over 1 share point in both dollars and volume over the last 4 weeks," up from a 0.4-pt $$ share gain for the full fiscal yr and +0.6 share in FQ4. STZ was still the #1 $$ share gainer across each timeframe, co added."Unnecessarily Low" Guidance? "Who Can Blame 'Em?" Analysts widely viewed STZ's guidance as conservative. But "who can blame 'em?" asked Well Fargo's Chris Carey. With easy comps for next several qtrs, guidance sets a "low bar" for new ceo Nick Fink, noted JP Morgan's Drew Levine. Roth MKM's Bill Kirk agreed, calling it "unnecessarily low" while adding that it "looks like a reset often associated with new leadership." Nick officially stepped into role yesterday and highlighted his "strong conviction" in co's strategy and "proven playbook" to kick off last wk's earnings call. But cautious guidance may be "prudent" at this stage, as RBC's Nik Modi and others posited. After last year's results, STZ's reduced beer guidance bore the brunt of analyst questions. Many wondered if its F26 projections for net sales +0-3% and oper income +0-2% were overly bleak. In reality, they turned out to be too rosy.Fiscal Yr Shipments Down ~4% with Depletions -2%; Net Sales -3% and Oper Income -7% For the full fiscal yr, beer net sales slipped 3% to $8.315 bil while oper inc fell 7% to $3.161 bil. Each landed within co's revised guidance that called for net sales to drop 2-4% with oper income down 7-9%. Shipments slid 3.8% and shed 1.2 mil bbls to 30.15 mil bbls for 12 mos thru Feb. Tho depletions dropped just 2.1%. While shipments trends trailed depletions by nearly 2 points for the full fiscal yr, their "volumes were roughly aligned during the fourth quarter and finished the fiscal year within approximately 99% of each other," exec commentary added.Beer Margins Fell to 38% in FY26; Could Fall a Bit Further in Fiscal 27 Constellation's beer oper margins fell to 38% vs 39.7% yr ago. And co forecasts margins to fall within 37-38% for its upcoming fiscal yr. That's even as co should see significant relief now that filled imported cans are exempt from aluminum tariffs under new rules that went into effect Apr 6. But expansion-related costs at co's new Veracruz brewery are largely expected to offset those benefits, coupled with fixed-cost absorption and other headwinds. Still, margin guidance was "better than the bears feared, with upside should volume growth be better than anticipated," wrote Bernstein's Nadine Sarwat.Modelo Especial Snapped 33-Yr Growth Streak; Still Nearly Half of STZ Volume Depletions declines were "largely driven" by Modelo Especial (down ~3%), Corona Extra (-7%), and Modelo Cheladas (-1%), partially offset by strong growth from Pacifico (+15%) and Victoria (+16%). So Modelo Especial's 33-yr growth streak finally came to an end. Tho at over 200 mil cases, Especial alone still accounts for almost half of STZ's total volume (415.4 mil cases in FY26) and easily eclipses that mark across the full brand fam. It remained the #1 beer brand by $$ in the US and "momentum improved as the year progressed," Bill added.Especial Nearly Flat in FQ4, Pacifico & Victoria on Fire; Corona Extra No Longer a "Growth Driver" Indeed, Especial depletions dropped just 1% in fiscal Q4, still the #4 $$ share gainer in FQ4 scans with $$ up slightly in tracked channels. And STZ's broader biz markedly improved for the qtr, as Modelo Cheladas grew depletions 5% and Pacifico (depletions +21%) and Victoria (+17%) were the "two fastest growing" beer brands in Circana's top 50. Yet Corona Extra depletions sagged 6% while lapping a 6% drop yr ago. If that brand leans more gen mkt, shouldn't its trend be less impacted? "While we don&#39;t see that necessarily as the growth driver of the business going forward," the overall brand fam is "very healthy," said Bill, adding that co will "continue to invest aggressively against Extra."Investing "Very Aggressively" in Summer; Mktg Up to 9.5% of Net Sales In fact, co plans to invest "very aggressively" behind many of its brands over key summer mos, Bill added. "We always invest" in the fiscal first half, but "you will see additional investment this year," he underscored. That will of course span top brands and kick up during World Cup especially for Modelo. But more mktg $$ will also go "against our high-end light beer strategy," as co's "seeing momentum" with recently repositioned Modelo Oro and Corona Premier at superpremium price point. "We think that remains a tremendous opportunity for our business," Bill said. Thruout new fiscal yr, co will increase its mktg investment to 9.5%, after previously lowering to 8.5% of net sales thru fiscal 28 in last yr's (now-scrapped) guidance. Suggests FY27 marketing investment will increase ~$75-90 mil, possibly even more if analysts are right and guidance is low.

Across-the-Board Drops for STZ in Fiscal '26; Flattish Sales Guidance Canny or Overly Cautious?

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