During the October 7 episode of Mad Money, Jim Cramer discussed Constellation Brands, Inc. (NYSE:STZ) after its earnings reaction took an unexpected turn. He described a stock that initially tumbled before recovering as management explained its outlook. The reversal left him more encouraged, although he remained reluctant to recommend buying. Cramer said:
We gotta ask, despite this back and forth, is the worst behind Constellation Brands? I think it’s far too soon to say something definitive, because this is a liquor business. But this was the best overall quarterly update that I’ve gotten from Constellation in quite a long time. With the stock still trading just over 10 times this year’s earnings estimates… I don’t blame anyone for feeling tempted to buy, although I wouldn’t go that far myself.
The secular headwinds for the beer and liquor industry are real, but they’re also well understood at this point, and they didn’t stop Constellation from putting up a strong quarter, even if the company got a boost from the World Cup and also the Knicks’ championship run.
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Wine and Spirits Give Cramer a Reason to Reconsider
Constellation Brands, Inc. reported fiscal second-quarter 2027 net sales of approximately $2.63 billion, up 6% year over year. Comparable earnings increased 3% to $3.74 per share. Its smaller wine and spirits division delivered 17% sales growth and $6.1 million in operating income, compared with a $19.8 million loss a year earlier.
The company is also expanding into ready-to-drink beverages through its acquisition of SpikedAde. The transaction includes $75 million upfront and up to $278 million in additional payments over five years, depending on future performance. That structure ties most of the potential purchase price to the brand’s results. That expansion comes as beverage companies compete for repeat purchases in a changing market. A broader look at analysts’ beverage-stock picks puts Constellation with businesses pursuing different routes to growth.
Management’s Explanation Changed the Earnings Reaction
The initial disappointment centered on the unchanged outlook. Cramer explained:
So why did the stock sell off so hard in response, then?… Simple. Even though the results were better than expected, management did not raise any part of the full-year forecast. When you beat numbers but leave your guidance untouched, Wall Street does the math and assumes that the rest of the year is going to be weaker than expected.
Management maintained its fiscal 2027 comparable earnings forecast of $11.20 to $11.90 per share. However, CEO Nicholas Fink said continued favorable September trends could take results toward the upper end. This was conditional optimism within the existing range, rather than a formal guidance increase. Before the earnings release, Cramer was already looking for answers beyond an earnings beat. His concern centered on a change in the industry that a stronger quarter alone might not resolve.
Beer Demand Still Leaves Questions
Constellation Brands, Inc.’s beer shipments increased 5.5%, but depletions, which measure sales from distributors to retailers, declined 0.6%. Modelo Especial and Corona Extra fell approximately 2% and 5%, respectively, partly offset by Pacifico, Victoria, and the Modelo Chelada’s approximately 19%, 15% and 5% growth, respectively. Rising shipments have not yet translated into growth across overall beer depletions.
Valuation provides some context for Cramer’s interest without establishing an industry bargain. Constellation trades at approximately 10.3x forward earnings, compared with 8.1x for Molson Coors. The companies have different brand portfolios, but both multiples reflect restrained expectations for beer producers. The low multiple had also divided opinion when Constellation approached a 52-week low. That debate included a tariff exposure less obvious than the beer’s Mexican origins might suggest, adding another consideration to the apparent bargain.
Fund Ownership Rises as Cramer Remains Cautious
According to Insider Monkey’s database, 59 hedge funds held Constellation Brands, Inc. in Q2, up from 56 in Q1. Short interest stood at 5.69% of the public float. Fund participation increased modestly, while the short position indicates that skepticism remains. Cramer closed by saying:
Here’s the bottom line: For me, the most encouraging part of this story is that Constellation Brands’ stock sold off like crazy in after-hours trading before rebounding and finishing today well into the black. While I’m not ready to start pounding the table on Constellation again, let’s just say this: I feel much better about this stock than I did 24 hours ago.
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