Constellation Brands (STZ), the company behind Corona and Modelo, reported fiscal first-quarter results that blew past Wall Street estimates. After Tuesday's close, the company posted adjusted earnings of $3.43 per share, easily beating the $3.21 consensus. Revenue came in at $2.43 billion, above the $2.39 billion analysts were looking for. And to top it off, management reaffirmed its full-year adjusted EPS guidance of $11.20 to $11.90, right in line with the $11.75 consensus.
So far, so good. But Bank of America analyst Peter Galbo isn't ready to pop a cold one just yet.
Galbo lowered his price target on Constellation to $145 from $152 while keeping an Underperform rating. The reason? The big unknown is whether beer depletions — a measure of how much beer is actually being sold to consumers — will hold up through the rest of the summer after a weak first quarter.
June sales got a boost from the FIFA World Cup and New York Knicks championship celebrations in key Constellation markets. That's nice, but Galbo warns that if those temporary catalysts fade without broader consumer momentum, demand could fizzle. Think of it like a summer blockbuster that opens big but doesn't have legs.
Bank of America also expects the company to reverse much of its first-quarter shipment build later in fiscal 2027, especially in the third quarter. That timing shift shouldn't affect full-year beer sales estimates much, but it could make quarterly comparisons look lumpy.
On the bright side, profit and margin expectations now look less risky after the earnings beat. Still, Galbo thinks the stock is unlikely to break out until revenue growth improves. He raised his fiscal 2027 EPS forecast slightly to $11.70 (from $11.57), and sees $12.28 in fiscal 2028 and $13.16 in fiscal 2029. But he also expects beer operating margins to come under pressure in the second and third quarters due to higher marketing spending and SG&A expenses.
Beyond the near-term noise, Galbo reiterated concerns about soft beer industry demand, pressure on Constellation's core Hispanic consumer base, and slower long-term alcohol consumption trends. Those factors, he says, continue to justify a discount in the stock's valuation.
Constellation shares were up 0.31% at $135.50 at the time of publication Thursday. The stock has some work to do to get back to Galbo's $145 target, but the real test will be whether summer beer sales can keep the momentum going.
