Constellation Brands (STZ) Q2 2025 earnings summary

Executive summary

• Q2 FY25 net sales grew 3% to $2.92 billion, led by 6% Beer growth and a 12% decline in Wine and Spirits, with comparable EPS up 14% to $4.32, but a reported EPS loss of $(6.59) due to a $2.25 billion non-cash goodwill impairment in Wine and Spirits.

• Beer segment delivered double-digit operating income growth and 270 bps margin expansion, outpacing the beverage industry and CPG sector in U.S. dollar sales.

• Wine and Spirits faced volume and mix declines, with ongoing commercial and operational actions to improve performance in H2 FY25.

• Net leverage ratio reduced to 2.9x, below the 3x target, and $249 million was returned to shareholders via Q2 share repurchases, with a $1.01 per share dividend declared.

• Strong cash flow generation and continued capital returns, with YTD operating cash flow up 15% to $1.9 billion and free cash flow up 12% to $1.2 billion.

Financial highlights

• Q2 FY25 net sales: $2.92 billion (+3% YoY); Beer: $2.53 billion (+6%), Wine and Spirits: $389 million (–12%).

• Comparable operating income: $1.09 billion (+13% YoY); Beer operating income: $1.08 billion (+13%), Wine and Spirits: $70.5–$80.7 million (–13%).

• Q2 FY25 comparable EPS: $4.32 (+14% YoY); reported EPS: $(6.59) due to goodwill impairment; comparable net income: $788 million.

• Gross margin increased to 51.8% from 51.1% YoY, led by Beer cost savings; Beer segment gross margin: 54.0%, Wine and Spirits: 42.2%.

• Operating cash flow YTD: $1.9 billion (+15%); free cash flow YTD: $1.2 billion (+12%).

Outlook and guidance

• FY25 comparable EPS affirmed at $13.60–$13.80; reported EPS outlook updated to $4.05–$4.25.

• FY25 net sales growth expected at 4–6% enterprise-wide; Beer: 6–8% growth, Wine and Spirits: 4–6% decline.

• FY25 operating income growth: Beer 11–12%, Wine and Spirits decline 16–18%, enterprise comparable growth 8–9%.

• FY25 operating cash flow target: $2.8–$3.0 billion; free cash flow: $1.4–$1.5 billion; capex: $1.4–$1.5 billion.

• Quarterly dividend of $1.01 per share declared for Class A Common Stock.