Constellation Brands, Inc.
STZ
$0.00
-2.32%
Constellation Brands, Inc. is the largest provider of alcoholic beverages in the United States, operating in the beer, wine, and spirits categories within the Consumer Defensive sector. The company's distinct competitive identity is as the dominant market leader in high-growth Mexican beer imports, deriving approximately 84% of its revenue from powerhouse brands like Modelo and Corona, which hold exclusive US distribution rights. The current investor narrative centers on the company's resilience and cash generation amidst an industry-wide slowdown in consumer demand and pricing power, as highlighted by recent news of defensive consolidation in the spirits sector, while ongoing portfolio pruning of its wine and spirits assets and its strategic investment in Canopy Growth continue to shape the debate around its capital allocation and growth avenues.…
STZ
Constellation Brands, Inc.
$0.00
Related headlines
Investment Opinion: Should I buy STZ Today?
Rating: Hold. The core thesis is that STZ is a fundamentally strong but growth-challenged company trading at a reasonable valuation, making it a hold for existing investors but lacking a clear catalyst for new money.
Supporting evidence includes a forward P/E of 12.24 based on $15.55 EPS estimates, which is inexpensive for a market leader. The company maintains robust gross margins above 53% and generates substantial free cash flow of $1.76 billion TTM. However, these strengths are counterbalanced by negative YoY revenue growth of -9.77%, high financial leverage (D/E of 1.76), and sparse analyst coverage which reduces visibility.
Key risks that could invalidate a Hold thesis are: 1) Revenue declines accelerating beyond the current -9.77% rate, and 2) A deterioration in gross margins from the current 53.23%. This Hold would upgrade to a Buy if revenue growth returns to positive territory and the forward P/E compresses further toward 10x. It would downgrade to a Sell if leverage increases (D/E > 2.0) or free cash flow meaningfully declines. Relative to its own historical PS multiples, the stock appears fairly valued to slightly undervalued, but the valuation does not yet fully discount the growth risks.
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STZ 12-Month Price Forecast
The outlook for STZ is one of stability over growth. Its powerful brands and cash generation provide a solid foundation, but near-term industry headwinds and high leverage cap the upside. The base case of range-bound trading is most probable. The stance would upgrade to Bullish on concrete evidence of revenue stabilization and a de-leveraging commitment. It would turn Bearish if the next earnings report shows accelerating top-line deterioration or margin collapse.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Constellation Brands, Inc.'s 12-month outlook, with a consensus price target around $0.00 and implied upside of — versus the current price.
Average Target
$0.00
2 analysts
Implied Upside
—
vs. current price
Analyst Count
2
covering this stock
Price Range
$0 - $0
Analyst target range
Insufficient analyst coverage available. The provided data indicates only 2 analysts are providing estimates for revenue and EPS, and no consensus price target, buy/hold/sell distribution, or target range is supplied. This limited coverage typically implies the stock may be under-followed by the broader institutional research community, which can be common for certain large-cap stocks with a clear dominant narrative or for companies between major reporting cycles. The implication of sparse coverage is potentially higher volatility and less efficient price discovery, as fewer professional opinions are actively shaping the market's view, placing greater weight on company-specific communications and macroeconomic trends affecting the beverage sector.
Bulls vs Bears: STZ Investment Factors
The evidence currently tilts slightly bearish due to the concrete headwinds of negative revenue growth and high financial leverage, which are immediate and quantifiable risks. However, the bull case is supported by strong underlying profitability and an attractive valuation, creating a compelling tension. The single most important factor in the investment debate is the resolution of top-line growth: whether the recent -9.77% YoY revenue decline is a temporary industry slowdown or the beginning of a sustained erosion in the pricing power and demand for Constellation's premium beer portfolio. If growth stabilizes or returns, the stock's low valuation multiples and high cash flow could drive significant upside; if the decline persists, the high leverage and concentration risks will be magnified.
Bullish
- Strong Core Profitability: The company's core beer business generates robust operating margins of 31.13% and a gross margin of 53.23% as of Q3 FY2026, demonstrating the premium pricing power and operational efficiency of its Modelo and Corona brands. This high profitability underpins significant free cash flow generation of $1.76 billion TTM.
- Attractive Forward Valuation: STZ trades at a forward P/E of 12.24 based on estimated EPS of $15.55, which is reasonable for a profitable market leader. The current Price-to-Sales ratio of 3.12 is near the lower end of its historical range, suggesting the stock is priced at a discount relative to its own history.
- With a beta of 0.432, STZ has demonstrated significantly lower volatility than the broader market, declining 3.09% over the past month while the SPY fell 4.28%. This relative defensive characteristic is attractive for investors seeking stability amidst market uncertainty.
- Significant Free Cash Flow: The company generates substantial free cash flow of $1.76 billion TTM, providing ample capital for debt reduction, dividend payments (current yield 2.3%), and strategic investments. This strong cash generation mitigates concerns around its elevated debt-to-equity ratio of 1.76.
Bearish
- Negative Revenue Growth: Q3 FY2026 revenue declined 9.77% year-over-year to $2.22 billion, a sequential drop from Q2's $2.48 billion, signaling deceleration and pressure on the top line. This aligns with recent industry news highlighting a 'growth hangover' and fading pricing power in alcoholic beverages.
- Extreme Product Concentration: Approximately 84% of revenue comes from the Beer segment, primarily Modelo and Corona, creating significant single-segment and brand concentration risk. Any disruption to these exclusive US import rights or a shift in consumer preference would materially impact the entire company.
- High Financial Leverage: The company's debt-to-equity ratio of 1.76 indicates a high degree of financial leverage, which increases risk in a rising interest rate environment. This is compounded by a current ratio of 0.92, suggesting potential short-term liquidity strain without relying on operating cash flows.
- Volatile & Negative Trailing Earnings: Trailing twelve-month EPS is marginally negative at -$0.0026, driven by a significant net loss of -$375.3 million in Q4 FY2025. While core operations are profitable, this earnings volatility and negative headline figure complicate valuation and investor perception.
STZ Technical Analysis
The stock is in a sustained downtrend over the past year, evidenced by a significant 1-year price change of -17.255%. As of the latest data, with a current price of $151.20 and a 52-week range of $126.45 to $196.91, the stock is trading at approximately 36% of its 52-week range, positioning it much closer to its annual lows than its highs, which may signal a potential value opportunity but also reflects persistent negative momentum and investor caution. Recent momentum shows a stark divergence, with the stock posting a 3-month gain of 7.1049% but a 1-month decline of -3.0893%, suggesting the short-term recovery from the lows may be stalling or encountering resistance, potentially indicating a period of consolidation after the sharp sell-off. Key technical support is clearly defined at the 52-week low of $126.45, while resistance looms near the 52-week high of $196.91; a sustained breakdown below support would signal a continuation of the bearish trend, whereas a breakout above resistance seems distant and would require a major catalyst. The stock's beta of 0.432 indicates it has been significantly less volatile than the broader market (SPY), which fell 4.28% over the past month while STZ declined 3.09%, offering a relative defensive characteristic that is notable given its consumer staples exposure.
Beta
0.43
0.43x market volatility
Max Drawdown
-34.8%
Largest decline past year
52-Week Range
$126-$197
Price range past year
Annual Return
-12.1%
Cumulative gain past year
| Period | STZ Return | S&P 500 |
|---|---|---|
| 1m | +0.9% | -0.3% |
| 3m | +1.6% | -2.0% |
| 6m | +6.3% | +3.5% |
| 1y | -12.1% | +36.2% |
| ytd | +6.4% | -0.9% |
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STZ Fundamental Analysis
Revenue growth has recently turned negative, with Q3 FY2026 revenue of $2.22 billion representing a year-over-year decline of -9.77%, and a sequential drop from Q2's $2.48 billion, indicating a deceleration and potential pressure on the top line. The business remains heavily reliant on its Beer segment, which contributed $2.01 billion in the latest quarter, while the Wine and Spirits segment contributed $213 million, highlighting the core driver but also the concentration risk. The company is fundamentally profitable, reporting Q3 net income of $502.8 million and a robust gross margin of 53.23%, though operating income of $692 million resulted in an operating margin of 31.13%, demonstrating strong underlying profitability from its premium beer portfolio. Profitability has been volatile on a quarterly basis, with a net loss of -$375.3 million in Q4 FY2025 due to significant other expenses, but the return to substantial profit in subsequent quarters shows core operations remain healthy. The balance sheet carries a high degree of financial leverage, with a debt-to-equity ratio of 1.76, which elevates financial risk, but this is partially offset by strong cash generation, as evidenced by trailing twelve-month free cash flow of $1.76 billion and a current ratio of 0.92, which indicates potential liquidity strain in covering short-term obligations without relying on operating cash flows.
Quarterly Revenue
$2.2B
2025-11
Revenue YoY Growth
-0.09%
YoY Comparison
Gross Margin
+0.53%
Latest Quarter
Free Cash Flow
$1.8B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is STZ Overvalued?
Given the trailing twelve-month net income is marginally negative at -$0.0026 per share, the primary valuation metric selected is the Price-to-Sales (PS) ratio. The stock trades at a trailing PS ratio of 3.12 and a forward PS implied by the market cap and estimated revenue is approximately 3.20, based on a $31.85 billion market cap and $9.95 billion consensus revenue estimate, indicating the market is pricing in stable sales multiples with modest growth expectations. Compared to sector averages, data is not available in the provided dataset for a direct industry PS comparison; however, the stock's forward P/E of 12.24, based on estimated EPS of $15.55, appears reasonable for a profitable market leader, though the elevated EV/EBITDA of 56.09 suggests the market is capitalizing earnings at a high multiple relative to operating profit, likely due to significant depreciation and amortization. Historically, the stock's own PS ratio has fluctuated significantly; the current PS of 3.12 is near the lower end of its historical range observed in the data, which has seen figures above 10 and even 20 during different periods, suggesting the current valuation may reflect a discount due to recent growth concerns or a more conservative market outlook compared to past optimism.
PE
-391.3x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range -21x~6710x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
56.1x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks are primarily centered on leverage and revenue concentration. The company's debt-to-equity ratio of 1.76 is elevated, and while covered by strong operating cash flow, it limits financial flexibility. More critically, 84% of revenue is tied to the Beer segment, creating an extreme dependency on the continued success of Modelo and Corona. Any regulatory change, competitive incursion, or consumer trend shift away from these brands would have an outsized impact. Furthermore, the recent -9.77% YoY revenue decline in Q3 highlights vulnerability to industry-wide demand softness.
Market & Competitive Risks include valuation compression and sector-wide headwinds. The stock trades at a forward P/E of 12.24, which appears reasonable, but its EV/EBITDA of 56.09 is exceptionally high, suggesting the market capitalizes earnings at a premium that could compress if growth stalls. Recent news of a $60B spirits merger signals defensive consolidation in the broader alcohol industry, acknowledging slowing consumer demand and fading pricing power. STZ's low beta of 0.432 offers relative defense but does not immunize it from these sector-specific pressures.
The Worst-Case Scenario involves a perfect storm of sustained revenue declines, margin compression from increased competition or input costs, and rising interest rates exacerbating its debt burden. This could trigger multiple compression and force dividend cuts or asset sales. The realistic downside is quantified by the 52-week low of $126.45, which represents a -16.4% decline from the current price of $151.20. The stock's maximum drawdown over the past year was -34.75%, suggesting in a severe adverse scenario, an investor could face losses of 25-35%.
FAQ
The key risks are, in order of severity: 1) Revenue Concentration & Decline: 84% of revenue comes from beer, and recent YoY growth was -9.77%. 2) Financial Leverage: A debt-to-equity ratio of 1.76 increases vulnerability to rising rates and economic downturns. 3) Industry Headwinds: The broader alcohol sector is experiencing slowing demand and fading pricing power, as highlighted by recent defensive M&A news. 4) Capital Allocation: The company's investment in Canopy Growth has been a drag, and future capital decisions will be scrutinized given the high leverage.
The 12-month forecast is framed by three scenarios. The Base Case (60% probability) sees the stock trading between $150 and $170, assuming revenue stabilizes and margins hold. The Bull Case (25% probability) targets $180 to $197, requiring a return to growth and multiple expansion. The Bear Case (15% probability) risks a retest of the 52-week low, with a range of $126 to $140. The base case is most likely, implying limited near-term upside from the current ~$151 price but also a floor provided by valuation and dividends. The key assumption is that industry headwinds persist but do not significantly worsen.
STZ appears fairly valued to slightly undervalued based on its forward earnings, but carries complexity. The forward P/E of 12.24 is reasonable for a profitable market leader. However, the elevated EV/EBITDA of 56.09 and high debt load signal the market is capitalizing earnings at a premium. Compared to its own history, the current Price-to-Sales ratio of 3.12 is near the lower end of its range, suggesting a discount due to recent growth concerns. Overall, the valuation is not demanding, but it reflects justified skepticism about near-term growth, implying the market expects stagnation rather than expansion.
STZ presents a mixed opportunity. For value or income investors seeking a defensive holding with a 2.3% yield, the forward P/E of 12.24 and strong cash flow are attractive. However, it is not a clear 'good buy' for growth investors, given the -9.77% YoY revenue decline and high debt-to-equity ratio of 1.76. The stock could be a good buy for those who believe the recent industry slowdown is temporary and that the company's premium brands will regain momentum, offering potential upside to the $180-$197 range. The key risk is a further slide toward the 52-week low of $126.45.
STZ is more suitable for a long-term investment horizon of 3-5 years. Its low beta of 0.432 and dividend profile align with a buy-and-hold strategy, allowing investors to collect income while waiting for a potential turnaround in growth or a re-rating. The stock lacks clear short-term catalysts, and sparse analyst coverage can lead to periods of volatility and inefficient price discovery, making it less ideal for short-term trading. A minimum holding period of 12-18 months is suggested to weather potential industry cyclicality and allow the company's capital allocation and growth initiatives to play out.