STZ Q1 Earnings: Beer Powers Through Wine & Spirits Restructuring

Let's pop the cork on the latest financial results from Constellation Brands (STZ), the beverage giant behind popular brands like Corona, Modelo, and Robert Mondavi. The company just released its first-quarter 2026 earnings report for the period ending May 31, 2025. Digging into the numbers reveals a company navigating a significant strategic shift, with a clear story of strength in one division financing a transformation in another.

For the quarter, Constellation Brands posted a total revenue of $2.515 billion, which resulted in a net income of $523.8 million. The chart below visualizes how the company's sales flowed through various costs and expenses to arrive at its final profit.

Beer Continues to Foam Over with Profits

The star of the show remains the Beer division. This segment, which includes powerhouse brands like Modelo Especial and Corona Extra, generated an impressive $2,234.5 million in revenue. Even more striking is its profitability: the beer business brought in $873.4 million in operating income, boasting a robust operating margin of over 39%. While net sales saw a slight 2% dip compared to the same quarter last year, which the company attributes mainly to the timing of shipments, the segment's powerful profit engine is undeniable. It's clear that America's thirst for Constellation's Mexican beer portfolio remains strong.

A Restructuring Hangover for Wine and Spirits

The story in the Wine and Spirits segment is far less bubbly. This division saw its revenue fall significantly to $280.5 million, a 28% decrease from the prior year. This drop led to an operating loss of $6.0 million for the quarter.

What's driving this decline? It appears to be a strategic, albeit painful, pivot. Constellation has been actively trimming its portfolio, divesting lower-priced "mainstream" brands to focus on the more lucrative "premium" and "fine wine" categories. The filing highlights the recent SVEDKA vodka divestiture and an upcoming "2025 Wine Divestitures" as key parts of this strategy. This transition is also reflected in a $52.1 million impairment charge for assets held for sale. An impairment charge is a non-cash expense that reduces the recorded value of an asset, and in this case, it directly hit the quarter's operating income. While these moves hurt revenue and profit in the short term, the company is betting that a leaner, more premium-focused portfolio will deliver higher-quality growth in the long run.

The Bottom Line

Constellation Brands' latest quarter paints a clear picture of a company in transition. The Beer segment continues to be a formidable cash cow, providing the financial strength to weather the significant restructuring in the Wine and Spirits division. The key challenge for management will be to see their strategic overhaul of the wine and spirits business through to a successful, profitable conclusion, all while ensuring their beer brands don't lose their fizz in a competitive market.