Freedom Broker downgraded Constellation Brands to “Hold” and cut the price target to $173

U.S. alcoholic beverage producer Constellation Brands (STZ), which owns the Corona, Modelo, and Robert Mondavi brands, reported strong results for fiscal Q1 2027. However, Freedom Broker analysts believe that short-term risks limit the upside potential for further share-price gains.

Financial results beat consensus forecasts across virtually all key metrics. Comparable gross margin rose by 170 basis points year over year to 52.7%, marking the first meaningful improvement after several quarters of decline. Comparable earnings per share (EPS) reached $3.43, exceeding analysts’ expectations by 7.6%.

The wine and spirits segment (Wine & Spirits) showed strong momentum. The division’s organic net revenue increased by 8% after a 6% decline in the prior quarter, while organic shipments rose by 6.6%. Growth was supported by the Kim Crawford and Mi CAMPO brands, and the company’s wine portfolio ranked second in market-share growth in the U.S.

The beer business maintained positive momentum: segment net revenue rose by 2% driven by higher shipment volumes and price increases. However, shipments from distributors’ warehouses declined by 0.3% due to a weaker consumer environment and higher gasoline prices in the U.S. Management views these factors as temporary and does not attribute them to weakening brand positions.

Despite strong fiscal Q1 2027 results, the company cannot provide precise guidance on financial performance due to pressure on consumer demand and rising marketing expenses.

CEO Nicholas Fink presented an updated growth strategy that предусматривает expanding the use of data and artificial intelligence, strengthening key brands, and selectively entering new market niches. In Q2 and Q3, the company plans to significantly increase marketing investments tied to major sporting events, which may temporarily weigh on profitability.

Not an individual investment recommendation.