Constellation Brands (NYSE:STZ) hasn't lost its edge. Following a tough 2019, the alcoholic beverage giant in late June posted surprisingly strong sales growth to kick off its new fiscal year. The owner of imported beer brands like Corona, Modelo, and Pacifico announced rising market share in those franchises, along with progress in engineering a rebound in the struggling wine and spirits segment.

Below are a few highlights from management's conference call with Wall Street analysts.

Two smiling men clinking their beer bottles, with three women in the background

Image source: Getty Images.

Winning market share with beer

During the first quarter, the Constellation beer business continued to gain share with growth across all channels, driving one-third of the growth of the high-end U.S. beer market.
-- CEO Bill Newlands

Beer sales were robust, jumping 7% as segment operating margin rose 1.5 percentage points to 39.3% of sales. Part of that uptick was due to elevated shipping volumes in preparation for potential tariff increases. However, Constellation Brands' 5% growth in depletions, an industry metric describing retail sales, beat management's expectations.

Newlands and his team said the growth was broad-based, with Modelo, Pacifico, Corona, and the new Corona Premier brands all winning market share in the period. In fact, executives revealed, Constellation Brands' portfolio managed to produce a disproportionate share of the growth of the entire premium beer market among U.S. consumers.

Wine progress

As we begin the transformation journey for our wine and spirits business, I would like to reiterate our long-term goal for this business, as we intend to grow net sales in the mid-single-digit range with operating margins migrating to 30%.
-- Newlands

Executives have projected that by selling off the lower-margin wine and spirits brands, they'll return that segment to faster growth and rising profitability. Investors saw hints of success on that score as the company's "power brands" -- which include Svedka vodka and Kim Crawford wine -- grew depletions by 4% this quarter compared to negative depletions for the brands that are being divested.

That expansion pace isn't quite up to management's goal of around 5%, and the division's 26% operating margin also came up short of long-term targets. Yet executives stressed the fact that trends are moving in the right direction.

Cash targets

We generated $437 million of free cash flow compared to $336 million last year. This impressive 30% growth was primarily driven by strong beer operating cash flow results and lower [capital expenditures]. We now expect fiscal 2020 free cash flow to be in the range of $1.2 billion to $1.3 billion, and operating cash flow to be in the range of $2 billion to $2.2 billion.
-- CFO David Klein

The business continued to throw off piles of cash, thanks mainly to the healthy sales volumes and rising prices of the beer portfolio. Management is directing most of these gains toward strengthening the business in areas like marketing and brewery capacity. Executives still intend to deliver $4.5 billion to shareholders over the next three fiscal years through dividends and stock repurchases, and the latest cash flow figures suggest it will have no problem reaching that goal.

Lots of cannabis options

We continue to aggressively support Canopy on a more focused, long-term strategy to win markets and form factors that matter, while paving a clear path to profitability.
-- Newlands

Management said it was "not pleased" with the latest earnings results from marijuana giant Canopy Growth (NYSE:CGC), which included mounting net losses. The stumble didn't darken executives' wider outlook for the company, though, or for the massive bets they've made on Canopy's business.

In fact, executives said that Constellation's Canopy investment, which is structured in a way that allows it to boost its ownership level over time, has become even more flexible lately. In conjunction with Canopy Growth's acquisition of Acreage Holdings, the deadlines on Constellation Brands' warrants have been extended. This change, management says, gives Constellation "more time to assess how the cannabis landscape is progressing" before it decides whether to plow ahead more aggressively into the emerging consumer space.