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1. Company Snapshot

1.a. Company Description

Constellation Brands, Inc., together with its subsidiaries, produces, imports, markets, and sells beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy.It provides beer primarily under the Corona Extra, Corona Premier, Corona Familiar, Corona Light, Corona Refresca, Corona Hard Seltzer, Modelo Especial, Modelo Negra, Modelo Chelada, Pacifico, and Victoria brands.The company offers wine under the 7 Moons, Cook's California Champagne, Cooper & Thief, Crafters Union, Kim Crawford, Meiomi, Mount Veeder, Ruffino, SIMI, The Dreaming Tree, Charles Smith, The Prisoner Wine Company, Robert Mondavi, My Favorite Neighbor, and Schrader; and spirits under the Casa Noble, Copper & Kings, High West, Mi CAMPO, Nelson's Green Brier, and SVEDKA brands.


It provides its products to wholesale distributors, retailers, on-premise locations, and state alcohol beverage control agencies.Constellation Brands, Inc.was founded in 1945 and is headquartered in Victor, New York.

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1.b. Last Insights on STZ

Constellation Brands' recent performance was positively driven by its Q3 FY26 earnings report, which beat estimates on both top and bottom lines. The company's premium brand portfolio and strong financials support long-term upside. Management maintains a $1.35B free cash flow outlook, with significant shareholder returns through dividends and buybacks. The company gained market share, with revenues declining less than expected and resilient margins. A reiterated "Buy" rating by analysts suggests the stock is undervalued, with a fair value estimated at $157.6.

1.c. Company Highlights

2. Constellation Brands' Q3 FY 2026: Beer Margins Shine Despite Volume Declines

Constellation Brands reported stronger-than-expected beer operating margins in Q3 FY 2026, despite volume declines, driven by cost savings initiatives, favorable pricing, and a depreciation timing benefit. The company's actual EPS came out at $3.06, beating estimates of $2.63. Revenue growth was muted, with analysts estimating a 0.3% increase for the next year. Beer operating margins were a highlight, with the company achieving mid-single-digit distribution growth for its beer portfolio in Q3. The current P/E Ratio of 23.27 suggests that the market has priced in a certain level of growth, and with an EV/EBITDA of 14.86, the company's valuation appears reasonable.

Publication Date: Jan -09

📋 Highlights
  • Q3 Beer Margins Exceeded Expectations: Operating margins were stronger than anticipated at 39-40%, driven by cost savings, pricing actions, and depreciation timing benefits despite 2.5-3% volume declines.
  • Q4 Margin Pressure Expected: Margins may fall due to seasonal volume drops, $25B in tariffs, rising aluminum costs, and a shift toward lower-margin products.
  • Pacifico Brand Gains Momentum: Achieved significant distribution, on-premise, and social media growth, with depletions down only 2.5-3% (outperforming broader portfolio).
  • Hispanic Market Challenges Persist: Beer category faces headwinds from socioeconomic concerns, though improvement noted in regions with <20% Hispanic representation.
  • Pricing and Packaging Adjustments: 1-2% price increases for Modelo Oro/Corona Premier, plus 7-ounce can introductions to stabilize depletions and meet consumer demand.

Operational Highlights

The company's beer category remains challenged, particularly among Hispanic consumers, who are concerned about the socioeconomic environment. However, Constellation Brands is cautiously optimistic about a potential recovery, citing easier compares, the benefit of the World Cup, and continued investment in its brands. Pacifico, a smaller brand, has been a success story, with significant gains in distribution, on-premise, and social media. Depletions have remained relatively consistent, down 2.5-3%, and the company sees opportunities for growth in distribution, price pack architecture, and controlling the controllables.

Pricing and Packaging Strategies

The company expects 1% to 2% beer pricing for the year, with some variation depending on market conditions. It has adjusted pricing for Modelo Oro and Corona Premier, which has led to improved trends. Constellation Brands has also introduced 7-ounce packaging in some states to meet consumer needs, demonstrating its ability to adapt to changing consumer preferences.

Outlook and Guidance

The company expects Q4 margins to be lower due to seasonal volume decline, headwinds from tariffs, aluminum pricing, and a shift in product mix. The guidance for FY '27 and '28, which is 39-40% beer margins, was given under different macroeconomic conditions, and the company will reassess this guidance in April. With a Net Debt / EBITDA ratio of 4.3, the company's leverage is manageable, and its ROE of 15.12% indicates a relatively healthy return on equity.

World Cup and Cannabis Rescheduling

The upcoming World Cup is expected to drive beer sales, particularly in the Hispanic community, and Constellation Brands will invest in promotions, shelf presence, and media to capitalize on the event. Regarding cannabis rescheduling, the company has shares in Canopy and will monitor the market's development, although it does not currently engage in the cannabis business. The company's Dividend Yield of 2.75% provides a relatively stable return for investors, and its Free Cash Flow Yield of 6.82% indicates a decent cash generation capability.

3. NewsRoom

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3 Consumer Staples Stocks Breaking Out This Month

Feb -09

Source: marketbeat.com

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Principal Financial Group Inc. Has $21.44 Million Position in Constellation Brands Inc $STZ

Feb -08

Source: defenseworld.net

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Canada Post Corp Registered Pension Plan Has $6.27 Million Position in Constellation Brands Inc $STZ

Feb -07

Source: defenseworld.net

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Richard Pzena's Strategic Moves: A Closer Look at PPG Industries Inc.

Feb -06

Source: gurufocus.com

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Altrius Capital Management Inc Increases Stock Position in Constellation Brands Inc $STZ

Feb -05

Source: defenseworld.net

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Constellation Brands Inc (NYSE:STZ) Given Consensus Recommendation of “Hold” by Brokerages

Feb -05

Source: defenseworld.net

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Top 4 Alcohol Stocks to Track Amid Inflation & Tariff Headwinds

Jan -29

Source: zacks.com

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First Look: Amazon cuts, Tesla pivots, Fed holds; gold surges

Jan -29

Source: gurufocus.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.56%)

6. Segments

Beer

Expected Growth: 6.4%

Growing popularity of Mexican beer brands, increasing demand for premium products, and Constellation Brands' strong distribution network drive growth in the beer segment, featuring iconic brands like Corona, and Pacifico.

Wine and Spirits

Expected Growth: 7.4%

Constellation Brands’ growth is driven by increasing demand for premium beer and wine, innovative product launches, and strategic acquisitions.

7. Detailed Products

Beer

Constellation Brands offers a wide range of beer brands, including Corona, Modelo, and Pacifico, among others.

Wine

Constellation Brands produces and distributes a variety of wine brands, including Robert Mondavi, Clos du Bois, and Kim Crawford.

Spirits

Constellation Brands offers a range of spirits, including Svedka Vodka, High West Whiskey, and Casa Noble Tequila.

Cannabis

Constellation Brands has a significant stake in Canopy Growth, a leading cannabis company, offering a range of cannabis products.

8. Constellation Brands, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Constellation Brands, Inc. operates in the beverage industry, where substitutes are available, but the company's strong brand portfolio and diversified product offerings mitigate the threat.

Bargaining Power Of Customers

Constellation Brands, Inc. has a large customer base, but the bargaining power of customers is limited due to the company's strong brand recognition and diversified product offerings.

Bargaining Power Of Suppliers

Constellation Brands, Inc. relies on suppliers for raw materials, but the company's scale and diversified supply chain mitigate the bargaining power of suppliers.

Threat Of New Entrants

The beverage industry has high barriers to entry, and Constellation Brands, Inc.'s strong brand portfolio and established distribution network make it difficult for new entrants to compete.

Intensity Of Rivalry

The beverage industry is highly competitive, with many established players, and Constellation Brands, Inc. faces intense rivalry from other major beverage companies.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 55.10%
Debt Cost 4.36%
Equity Weight 44.90%
Equity Cost 8.64%
WACC 6.28%
Leverage 122.74%

11. Quality Control: Constellation Brands, Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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A-Score: 4.4/10

Value: 4.2

Growth: 3.9

Quality: 5.6

Yield: 4.0

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Volatility: 8.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

163.2$

Current Price

163.2$

Potential

-0.00%

Expected Cash-Flows