Constellation Brands
STZ
$130.56
-6.19%
Constellation Brands, Inc. is a leading producer and marketer of beer, wine, and spirits in the United States, with its portfolio anchored by iconic Mexican beer imports such as Modelo and Corona, which account for over 90% of its revenue. The company holds exclusive U.S. rights to these brands, making it a dominant player in the high-margin beer import segment, while it has strategically pruned its wine and spirits portfolio to focus on core growth areas. Currently, the stock is under scrutiny as investors weigh the company's robust beer sales and share buyback program against a broader industry slowdown in alcohol consumption and margin pressures, with recent earnings guidance falling short of Wall Street expectations and the stock trading near multi-year lows despite a strong operational performance.…
STZ
Constellation Brands
$130.56
Related headlines
Investment Opinion: Should I buy STZ Today?
Based on the analysis, we rate STZ as a 'Buy' with a thesis that the company's dominant beer portfolio and attractive forward valuation provide a favorable risk/reward. The analyst consensus is 'Buy' with an average target price of $170.83, implying a 22.7% upside. The stock's forward P/E of 11.23x is compelling, especially given the expected earnings growth, and the company's strong margins and free cash flow support shareholder returns.
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STZ 12-Month Price Forecast
The AI assessment leans bullish due to the attractive forward valuation and strong beer performance, which could drive earnings growth. However, the negative revenue trend and high debt levels warrant caution. The base case of a 22.7% upside to the average target is achievable if the company executes on its beer strategy and stabilizes wine/spirits. An upgrade to high confidence would occur if revenue growth turns positive and margins expand, while a downgrade would be triggered by continued revenue declines or margin compression.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Constellation Brands's 12-month outlook, with a consensus price target around $170.83 and implied upside of +30.8% versus the current price.
Average Target
$170.83
0 analysts
Implied Upside
+30.8%
vs. current price
Analyst Count
—
covering this stock
Price Range
$115 - $209
Analyst target range
The target price range spans from a low of $115.00 to a high of $209.00, indicating a wide dispersion of expectations. The high target of $209 implies a potential upside of 50.2% from the current price, likely assuming a successful turnaround in beer volume growth and margin recovery, while the low target of $115 suggests a downside of 17.4%, possibly reflecting concerns about prolonged weakness in wine/spirits and increased competition. Recent ratings actions have been largely neutral, with no major upgrades or downgrades, but the presence of a wide target range highlights the uncertainty surrounding the stock's future performance.
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Bulls vs Bears: STZ Investment Factors
Constellation Brands presents a mixed picture: its beer business remains robust with strong margins and a dominant market position, but overall revenue is declining due to weakness in wine/spirits, and the stock has significantly underperformed the market. The forward valuation is attractive, and analysts see upside, but high debt and industry headwinds temper enthusiasm. Currently, the bearish evidence is slightly stronger given the negative revenue trend and stock price action, but the bull case hinges on beer growth and margin expansion driving earnings recovery. The key tension is whether the beer segment's strength can offset the decline in wine/spirits and justify the forward P/E, which assumes substantial earnings growth.
Bullish
- Dominant Beer Portfolio Drives Growth: Beer revenue grew to $2.28 billion in Q1 FY2027 from $2.26 billion a year earlier, showing resilience despite overall revenue decline. The Modelo and Corona brands hold exclusive U.S. rights, providing a competitive moat in the high-margin import segment.
- Attractive Forward Valuation: The forward P/E of 11.23x is significantly below the trailing P/E of 16.41x, implying expected earnings growth. This translates to a forward earnings yield of 8.9%, which is compelling relative to the broader market and historical norms.
- Strong Profitability and Margins: Gross margin stands at 51.6%, and operating margin at 31.3%, reflecting efficient operations and pricing power. Net margin of 18.5% in Q1 FY2027 underscores the company's ability to convert revenue into profit.
- Analyst Consensus and Upside: With a 'Buy' rating from 23 analysts and an average target price of $170.83, the stock offers a potential upside of 22.7% from the current price of $139.18. The high target of $209 implies a 50.2% upside, indicating significant optimism among some analysts.
Bearish
- Declining Overall Revenue: Q1 FY2027 revenue fell 3.26% year-over-year to $2.43 billion, breaking a pattern of modest growth. The wine and spirits segment dropped sharply to $149.2 million from $251.5 million, dragging total performance despite beer growth.
- Stock Underperforming Market: STZ's 1-year price change is -17.89%, while the S&P 500 gained +20.37%, resulting in a relative underperformance of -38.26%. The stock trades near its 52-week low of $126.45, reflecting persistent selling pressure.
- High Debt Levels: Debt-to-equity ratio is 1.39, indicating significant leverage. Interest expenses of $85.8 million in Q1 FY2027 consume a portion of operating income, increasing financial risk if margins compress or rates rise.
- Industry Headwinds and Competition: The alcohol industry is facing slowing consumer demand and fading pricing power, as evidenced by a $60B spirits merger signaling defensive consolidation. Competition from other beverage categories and changing consumer preferences pose threats.
STZ Technical Analysis
The stock is in a clear downtrend over the past year, with a 1-year price change of -17.89%, significantly underperforming the S&P 500's +20.37% gain. Currently trading at $139.18, the stock is near the lower end of its 52-week range, at approximately 81% of the range (calculated as (139.18 - 126.45) / (171.00 - 126.45) = 0.81), indicating it is closer to the 52-week low of $126.45 than the high of $171.00. This positioning suggests a market that is pricing in pessimism, but also potential value if the company's fundamentals stabilize.
Beta
0.40
0.40x market volatility
Max Drawdown
-27.5%
Largest decline past year
52-Week Range
$126-$169
Price range past year
Annual Return
-22.4%
Cumulative gain past year
| Period | STZ Return | S&P 500 |
|---|---|---|
| 1m | -1.7% | +4.0% |
| 3m | -10.9% | +5.3% |
| 6m | -16.5% | +12.6% |
| 1y | -22.4% | +20.1% |
| ytd | -7.5% | +13.3% |
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STZ Fundamental Analysis
Revenue in the most recent quarter (Q1 FY2027, ended May 31, 2026) was $2.43 billion, a decline of 3.26% year-over-year, breaking a streak of modest growth seen in prior quarters (Q2 FY2026: $2.48B, +1.5% YoY; Q3 FY2026: $2.22B, -9.8% YoY; Q4 FY2026: $1.92B, -11.3% YoY). The revenue decline is primarily driven by the wine and spirits segment, which fell to $149.2 million in Q1 FY2027 from $251.5 million in Q1 FY2026, while beer revenue grew to $2.28 billion from $2.26 billion, showing resilience. This mixed performance highlights the company's reliance on beer to offset weakness in other categories, but overall growth has turned negative, raising concerns about the company's ability to expand its top line in a challenging consumer environment.
Quarterly Revenue
$2.4B
2026-05
Revenue YoY Growth
-3.3%
YoY Comparison
Gross Margin
54.3%
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 that Constellation Brands is profitable (net income of $653.8 million in Q1 FY2027), the PE ratio is the most appropriate valuation metric. The trailing PE is 16.41x, while the forward PE is 11.23x, implying that the market expects significant earnings growth in the coming year, likely driven by margin expansion and cost controls. The gap between trailing and forward PE suggests a forward earnings yield of 8.9%, which is attractive relative to the broader market, but it also reflects the market's skepticism about the sustainability of current earnings levels.
PE
16.4x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 9x~46x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
12.3x
Enterprise Value Multiple
Investment Risk Disclosure
Financial risks are notable: the company carries a debt-to-equity ratio of 1.39, and interest expenses of $85.8 million in Q1 FY2027 represent a significant fixed cost. While free cash flow is positive at $1.83 billion TTM, the high leverage amplifies vulnerability to rising interest rates or margin compression. Revenue concentration is another concern—over 90% of revenue comes from beer, and within that, the Modelo and Corona brands are critical. A decline in beer volumes or increased competition could disproportionately impact earnings. Additionally, the wine and spirits segment has been declining sharply, falling from $251.5 million to $149.2 million year-over-year, indicating a structural issue that management has yet to resolve.
FAQ
The key risks include: 1) Financial risk from high debt (debt-to-equity of 1.39) and interest expenses of $85.8 million per quarter, which could strain cash flow if rates rise. 2) Competitive risk from industry consolidation and changing consumer preferences, as seen in the $60B spirits merger. 3) Macro risk from inflation and delayed Fed rate cuts, which could dampen consumer spending. 4) Company-specific risk from the declining wine/spirits segment, which fell from $251.5 million to $149.2 million year-over-year. These risks are ranked with financial and competitive risks being most severe.
The 12-month forecast is based on three scenarios: a bull case with a 30% probability and target range of $170-$209, driven by strong beer growth and margin expansion; a base case with a 50% probability and target range of $150-$170, assuming moderate beer growth offsetting wine/spirits declines; and a bear case with a 20% probability and target range of $115-$126, if beer stalls and wine/spirits deteriorate. The most likely scenario is the base case, with the stock reaching the average analyst target of $170.83, implying a 22.7% upside. Key assumptions include stable beer volumes and no major macro shocks.
STZ appears undervalued based on its forward P/E of 11.23x, which is below the trailing P/E of 16.41x and likely below the industry average. The market is pricing in significant earnings growth, but the stock trades at a discount to its historical valuation and analyst targets. The forward earnings yield of 8.9% is attractive relative to the broader market. However, the discount reflects skepticism about the sustainability of earnings given the revenue decline. If the company meets expectations, the stock could re-rate higher, making it undervalued at current levels.
STZ presents a compelling risk/reward at current levels, with a forward P/E of 11.23x and an average analyst target of $170.83, implying a 22.7% upside. The company's beer business is resilient, and its strong margins and free cash flow support shareholder returns. However, the overall revenue decline and high debt levels are concerns. For investors with a medium-term horizon and tolerance for volatility, STZ could be a good buy, especially if they believe beer growth will offset wine/spirits weakness. Those seeking immediate growth might find better opportunities elsewhere.
STZ is better suited for long-term investment due to its defensive nature, strong brand portfolio, and dividend yield of 2.58%. The stock's beta of 0.4 indicates lower volatility than the market, making it a stable holding for income and moderate growth. Short-term trading could be challenging given the stock's recent downtrend and negative revenue growth, but the attractive forward valuation may offer a value entry point. A suggested minimum holding period is 3-5 years to allow the beer business to drive earnings growth and the stock to re-rate. Investors with a shorter horizon should be prepared for potential volatility from earnings and industry news.