CONSTELLATION BRANDS, INC. (STZ): what the price assumes

boothcheck covers CONSTELLATION BRANDS, INC. (STZ) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-07-11.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/STZ

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 6.6% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple value, while growth-DCF lands below the price. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Asset, Earnings, Relative Families that call it expensive: Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.4%); the inversion above states its own rate.

Per-Model Detail (n=16)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Constellation Brands is now essentially a Mexican beer royalty stream, with Beer at 91 percent of revenue behind Modelo, Corona, and Pacifico, brewed in Mexico for the U.S. market, which concentrates both the franchise strength and the tariff exposure in a single border crossing.
• The market is paying about 11x operating income at $133.99 (July 10, 2026), below what even a 5 percent annual operating-profit decline would warrant, so the price already assumes erosion; the biggest specific risk is that the erosion is structural, with depletions slightly negative and beer margins absorbing a 340 basis point hit from aluminum tariffs last quarter.
• Watch the depletion trend and the fiscal 2027 guidance rails: management affirmed comparable EPS of $11.20 to $11.90 and beer operating margins of 37 to 38 percent, but withdrew its fiscal 2028 outlook citing tariff uncertainty.

Bull Case

The earnings line is quietly moving the right way while the stock price tells a catastrophe story. In the quarter ended May 31, 2026, GAAP diluted EPS rose 31 percent to $3.79 and comparable EPS rose 7 percent to $3.43, both ahead of consensus; beer net sales grew 2 percent to $2.28 billion on shipment growth of 1.8 percent and continued pricing power, and depletions slipped just 0.3 percent against a consumer backdrop that has flattened most of the beverage aisle. That is not a business in decline; it is a business holding volume roughly flat while growing dollars, absorbing a 340 basis point tariff hit to beer margins, and still delivering EPS growth. Management affirmed full-year comparable EPS guidance of $11.20 to $11.90, which puts today's $133.99 near 11 to 12 times the company's own labeled forward earnings.

The portfolio behind those numbers has been deliberately concentrated into its best asset. Wine and spirits divestitures shrank the reported top line but left Beer at 91 percent of revenue, anchored by brands the 10-K describes through a strategy of "continuing to grow our high-end imported beer brands through maintenance of leading margins". Even in a soft quarter for the flagships, the bench showed depth: Pacifico, Victoria, and the Modelo Chelada line grew while Modelo Especial and Corona Extra were soft, and new-product cadence continues, with Corona Sunbrew moving from select markets to a nationwide launch. Beer operating margins guided at 37 to 38 percent remain the envy of the category, and roughly 90 percent of fiscal 2027 aluminum needs are hedged, capping the tariff bleed that spooked the market.

Meanwhile the price sits below what even a 5 percent annual operating-profit decline would warrant, in the lower half of the consumer-staples peer range, with the asset-value and sector-multiple lenses landing at or above today's level. Return on equity runs near 21 percent on the trailing basis. A 21 percent ROE branded franchise, guiding to flat-to-growing beer sales, priced for perpetual decline: the bull case is that any outcome short of structural decay re-rates it, and the fastest catalyst would be nothing more exotic than two consecutive quarters of positive depletions.

Bear Case

The price rests on one load-bearing assumption: that the Mexican beer franchise, which is now 91 percent of revenue, is a flat-to-growing annuity rather than a peaked one. Every other number is downstream of it, and it is precisely the assumption the recent data stresses. Depletions went slightly negative last quarter, with the two flagship brands, Modelo Especial and Corona Extra, both soft; the growth came from smaller brands and pricing. The franchise's core consumer skews Hispanic, a demographic whose spending has been disproportionately pressured, and the broader category faces a slow-bleed moderation trend among younger drinkers. If flat depletions are the new baseline rather than a cyclical trough, then a price that discounts 5 percent annual decline is not obviously cheap; it is approximately right.

The second fragile assumption is that tariffs stay a manageable line item. The 10-K lists "economic and other uncertainties associated with our international operations, including new or increased tariffs" among its principal risks, and the exposure is structural: the beer that generates nearly all the profit is brewed in Mexico and crosses a border whose trade terms are being renegotiated in real time. Aluminum tariffs already cost beer margins 340 basis points last quarter, the hedges that cap this year's damage expire into whatever prices prevail next year, and management's own confidence horizon has shortened, with the fiscal 2028 outlook withdrawn outright over tariff uncertainty. A company that cannot see two years ahead is asking investors to underwrite what it will not.

The balance sheet and the remnant portfolio limit the margin for error. Net debt of $10.5 billion runs about 3.9 times trailing operating income with interest covered 7.5 times, serviceable but heavy for a business whose growth engine has stalled, and trailing GAAP earnings are negative after the wine-and-spirits impairments, a reminder that the last diversification chapter ended in write-downs. The filing's own hope that "beyond Fiscal 2026 our wine and spirits business will return to net sales growth" has been overtaken by divestitures. What remains is a single-category, single-supply-chain, tariff-exposed franchise at peak U.S. penetration. The earnings-power and cash-flow lenses read today's price at two to three times what a no-growth version of this business supports, which is the sober way of saying the price still assumes the beer machine never actually declines. The bear case is that it already started.

Valuation

Start with what the price does not require: growth. At about 11 times company-wide operating income, $133.99 sits below what even a 5 percent annual operating-profit decline would warrant, a multiple in the lower half of the peer range and within what the company has recently delivered. The market has already run the bear case through the price. The live question is only whether the decline it discounts is too pessimistic, about right, or not pessimistic enough.

The method families split along that exact line. The asset-value and peer-multiple lenses effectively support the price, with the sector EV/EBITDA read landing about 26 percent above it and the exit-multiple cash-flow read at parity holding today's roughly 11x EV/EBITDA flat. The earnings-power and growth-DCF families read the price as two to three times what they defend, but both inherit a distorted trailing base: the cash-flow projections carry the negative revenue growth of the wine-and-spirits divestiture years (the engine's inputs show trailing revenue shrinking around 10 percent annually, which is portfolio surgery, not demand), and trailing GAAP earnings are negative on impairment charges even as the company guides fiscal 2027 GAAP EPS to $11.50 to $12.20. Reconciled, the picture is a value-supported name whose statistical record looks worse than its operating reality, priced accordingly.

What has to be true is narrow: beer net sales inside the guided minus 1 to plus 1 percent, beer operating margins holding the guided 37 to 38 percent against tariff costs (about 90 percent of this year's aluminum is hedged), and depletions stabilizing near flat. The current trailing operating margin runs about 28 percent company-wide. Solvency is the pressure point worth watching rather than fearing: $10.5 billion of net debt at roughly 3.9 times trailing operating income (pre-tax basis) with 7.5 times interest coverage leaves the dividend and deleveraging fundable from the roughly $1.8 billion of trailing free cash flow, but removes the balance-sheet slack that would make a genuine volume decline comfortable. The decisive number for this price is the depletion trend, printed four times a year.

Catalysts

The first-quarter fiscal 2027 report on June 30 reset the near-term picture: net sales of $2.43 billion fell 3 percent on the smaller wine business, but beer net sales rose 2 percent to $2.28 billion, GAAP diluted EPS rose 31 percent to $3.79, comparable EPS rose 7 percent to $3.43 (both beats), and fiscal 2027 guidance was affirmed at $11.50 to $12.20 GAAP EPS and $11.20 to $11.90 comparable EPS with beer margins of 37 to 38 percent. The next print, on the early-October cadence, carries the depletion trend as its headline number: last quarter's minus 0.3 percent, with Modelo Especial and Corona Extra soft but Pacifico, Victoria, and the Chelada line growing, sits right at the boundary between stabilization and erosion.

Tariff policy is the exogenous catalyst in both directions. Aluminum tariffs cost beer margins 340 basis points last quarter; roughly 90 percent of fiscal 2027 aluminum needs are hedged, so the current-year damage is largely capped, but management withdrew its fiscal 2028 outlook citing tariff uncertainty, which converts every trade-policy headline into a stock event. Any clarity on Mexican import terms, favorable or hostile, would move the multiple more than a quarter's operations.

The slower threads: execution of the high-end beer strategy the 10-K describes (distribution gains for key brands, the nationwide Corona Sunbrew launch), the final shape of the slimmed wine-and-spirits rump after divestitures, and capital allocation between the dividend, buybacks, and paying down the $10.5 billion net debt stack. With the price already discounting operating decline, the setup is asymmetric around the depletion number: consecutive positive prints would do more for the stock than any single earnings beat.

Peer Cohorts (Per Segment, With Filing Citations)

Beer (reported)

• BUD (Anheuser-Busch InBev SA/NV)
• FY2025 20-F: …by volume in the world. We hold the number one position in terms of total market share of beer by volume in the United States, Mexico and Brazil, three of the top five largest beer profit pools in the world. We estimate that we hold the number one position by volume in the premium and super premium beer category, in…
• FY2025 20-F: …Light, Presidente Regular, Stella Artois, The One Non-Beer : 7UP, 911, Enriquillo, Malta Morena, MontPellier, Pepsi, Red Bull, Red Rock, Vital 911 Ecuador Beer : Budweiser, Club Premium Clásica, Club Premium Platino, Corona, Corona Cero, Modelo Especial, Nuestra Siembra, Nuestra Siembra Inti, Pilsener, Pilsener…
• TAP (MOLSON COORS BEVERAGE CO)
• FY2025 10-K: …over the years becoming an increasingly consolidated global beer market. For many years, the industry operated primarily on local presence with modest international expansion achieved through export, license and partnership arrangements. In contrast, it has now become increasingly complex and competitive as the…
• FY2025 10-K: …brewing or distribution activities are either a member of the European Union ("EU") or a current candidate to join the EU, with the exception of the U.K. As such, there are similarities in the regulations that apply to many parts of our EMEA&APAC segment's operations and products, including brewing, food safety,…
• SAM (THE BOSTON BEER COMPANY, INC.)
• FY2025 10-K: …operational shutdowns, or natural or other unavoidable catastrophes. The Company would work with available third-party production facilities to attempt to minimize any potential disruptions. Competition The US Beer Market is highly competitive due to large domestic and international brewers and a large number of…
• FY2025 10-K: Item 16. Form 10-K Summary 76 Signatures 77 2 PART I. Item 1. Business General The Boston Beer Company, Inc. and certain subsidiaries (the "Company") are engaged in the business of selling alcohol beverages throughout the United States and in selected international markets, under the trade names "The Boston Beer…
• ABEV (AMBEV S.A.)
• FY2025 20-F: …festivities. In Canada, volumes are stronger in the second and third calendar quarters due to the summer season. This is demonstrated by the table below, which shows our volumes by quarter and business segment: 2025 Quarterly Volumes ( as a percentage of annual volumes ) 1st Quarter 2nd Quarter 3rd Quarter 4th…
• FY2025 20-F: …Baltica, Taquiña, Chicha Taquiña Non-Beer : Pepsi, Pepsi Black, 7UP, Guaraná Antarctica, Gatorade, Maltin, H20H!, Somos (water) Chile Beer : Baltica, Beck's, Becker, Brahma, Budweiser, Corona, Coronita, Cusqueña, Goose Island, Hoegaarden, Kilometro 24.7, Leffe, Malta del Sur, Michelob ULTRA, Modelo Especial, Negra…

Wine and Spirits (reported)

• DEO (DIAGEO plc)
• FY2025 20-F: .5%, with growth in US Spirits and Diageo Beer Company (DBC USA) offset by a slight decline in Canada. Volume declined 0.8%, with a slight decline in US Spirits and Canada offsetting positive growth in DBC USA, which was offset by positive price/mix of 2.3%. Organic operating profit grew 0.3%, with marketing and…
• FY2025 20-F: …$3.6bn Reported net sales Read more on page 29 . 8 Diageo Form 20-F 2025 Investment case A strong investment case Attractive, long-term industry fundamentals VERSATILITY OF SPIRITS The versatility of spirits positions the category well for the future across occasions, premiumisation and the evolution of consumer…
• BF-B (Brown-Forman Corporation)
• FY2025 10-K: …Global Spirits. In addition, particularly in the United States, we compete with national companies and craft spirit brands, many of which entered the market in the last few years. Brand recognition, brand provenance, quality of product and packaging, availability, flavor profile, and price affect consumers' choices…
• FY2025 10-K: …to distribute our brands, generally under fixed-term distribution contracts. In Canada, we sell our products to provincial governments. We believe that our customer relationships are good and that our exposure to concentrations of credit risk is limited due to the diverse geographic areas covered by our operations…
• BF-A (Brown-Forman Corporation)
• (no filing in the citation store)

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.