10:45 AM EDT, 10/03/2024 (MT Newswires) -- Constellation Brands' ( STZ ) fiscal second-quarter earnings beat market estimates while revenue fell short of Wall Street expectations as the company booked a $2.25 billion non-cash goodwill impairment loss in its wine and spirits business.

Adjusted earnings came in at $4.32 a share for the three months through August, up from $3.80 the year before. The consensus on Capital IQ was for normalized EPS of $4.07. Net sales rose 3% year over year to $2.92 billion but missed the Street's view for $2.94 billion. The stock was down 2.9% in Thursday trade.

"While the current macroeconomic backdrop has weighed on demand for beverage alcohol - and for consumer packaged goods, more broadly - we continued to deliver strong performance in (the second quarter) of fiscal 2025," Chief Executive Bill Newlands said in a statement.

Sales of wine and spirits dropped 12% year over year to $388.7 million, as shipment volumes fell 9.8% amid tough market conditions, mainly in the US wholesale channel, according to the company. The division's depletion rate, or the pace at which units are sold to end consumers, was roughly negative 18%, while the operating margin remained relatively flat at 18.1%.

The wine and spirits division incurred a non-cash goodwill impairment loss of $2.25 billion in the quarter, Constellation Brands ( STZ ) said. In September, the company warned that it expected the segment to log an impairment charge of about $1.5 billion to $2.5 billion amid declines in the overall wine market and its mainstream and premium wine brands.

Beer revenue gained 6% to $2.53 billion as shipments grew 4.6%. The segment's depletion rate came in at 2.4% driven by continuous demand growth across most of the portfolio, led by a 23% jump in the Pacifico brand. The division's operating margin rose 270 basis points to 42.6%.

Constellation Brands ( STZ ) maintained the fiscal 2025 outlook it issued in September, projecting comparable EPS to be between $13.60 and $13.80. The Street is currently looking for $13.68.

The group also reaffirmed its full-year enterprise sales growth guidance of 4% to 6%, with beer revenue pegged to rise between 6% and 8% and wine and spirits to be down 4% to 6%.

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