By Evie Liu

Stock in alcohol giant Constellation Brands jumped nearly 4% in after-hours trading Tuesday after the company reported better-than-expected results for the quarter ended in May.

For the fiscal first quarter, the maker of Modelo Especial and Corona reported adjusted earnings of $3.43 a share, ahead of Wall Street expectations of about $3.19. Net sales fell 3.3% from a year earlier to $2.43 billion, but that was still better than analysts' forecast of roughly $2.39 billion.

Much of the sales decline stemmed from the wine and spirits segment as Constellation sold underperforming brands. Beer sales actually increased about 2% year over year, following the 1% growth in the previous quarter after many quarters of weakness.

Constellation reaffirmed its fiscal 2027 adjusted earnings guidance of $11.20 to $11.90 a share.

Alcohol demand has been weak for several years as economic uncertainty has made consumers more cautious about discretionary spending. Constellation Brands, especially, faces softer demand from Hispanic consumers, who make up roughly half of its beer customer base, as affordability pressures and concerns around immigration enforcement weighed on sentiment.

Management said earlier this year that sales to Hispanic consumers were showing signs of recovery.

Modelo has continued to gain market share, Constellation said, while Victoria beer is gaining traction among younger Hispanic consumers aged between 21 and 25.

Constellation has sold many of its mainstream wine brands to keep a more premium portfolio. It's also leaning harder into imported Mexican beer, craft spirits, and low- or no-alcohol products as young consumers increasingly embrace moderation. The company is targeting more than $200 million in yearly cost savings by fiscal 2028.

Constellation shares closed at $139 in regular trading on Tuesday, roughly flat for the year but still well below their 52-week high.

The stock has lost some ground over the past three months, suggesting investors are not yet convinced that one better beer quarter is enough.

Two consecutive quarters of growth could give investors more confidence that Constellation's premium beer brands still have pricing power and consumer relevance.

Write to Evie Liu at evie.liu@barrons.com

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