STZ F2Q26 - Cerveza anyone? is this the bottom? Bull case $220.

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October 07, 2025

Constellation Brands Investment Report - Q2 FY2026 Volume Pressures & Consumer Sentiment Crisis

CONSTELLATION BRANDS (STZ)

🍺🍷 Premium Beverage Alcohol Leader | Modelo #1 Beer Brand, Consumer Sentiment Crisis Deepens

Q2 FY2026 Results | 80% Consumers Cite Socioeconomic Concerns, Inventory Rebalancing, Wine Beats Market 6 Months Straight

💰 Market Cap: $25.1B | 🏢 Employees: 10,600+ | 🇲🇽 Mexican Beer Leader
👨‍💼 CEO Bill Newlands | 🎯 Premium Portfolio Focus | 🏆 Modelo #1 Brand
$142.70
📉 -$79.39 (-35.7%) YTD
Current Price
Price Target Scenarios

18-Month Horizon (2026 Targets)

$220.00
Bull Case (+54%)
Tariff Relief
Demand Rebounds
📊 Valuation Calculation:
• 2026E EPS: $15.50 × P/E: 14.2x = $220.00
🚀 Key Assumptions:
Tariff rollbacks accelerate • Hispanic consumer confidence rebounds • Beer volumes positive • Premium wine gains traction • Aluminum stabilizes • Share gains accelerate • Pricing power • Margins 32%+
$165.00
Base Case (+16%)
Steady Recovery
Gradual Improvement
📊 Valuation Calculation:
• 2026E EPS: $13.00 × P/E: 12.7x = $165.00
⚖️ Key Assumptions:
Tariffs stay but partially mitigated • Beer volumes stabilize low single-digit decline • Modelo keeps #1 • Premium wine performs • Consumer demand improves H2 • Margins 28-29% • FY26 guidance met at midpoint
$90.00
Bear Case (-37%)
Demand Collapse
Tariff Escalation
📊 Valuation Calculation:
• 2026E EPS: $9.00 × P/E: 10.0x = $90.00
🔻 Key Assumptions:
More tariff increases • Hispanic sentiment worsens • Beer volumes down mid-single digits • Domestic brand pressure • Aluminum spikes • Premium wine fails • Consumer recession • Modelo loses share to domestic
Bottom Line for Retail Investors
👑
Brand Leadership
Modelo #1 US beer (overtook Bud Light 2023). Corona globally iconic. 6 of top 15 share-gaining brands. Strong equity across portfolio. Exclusive US rights to Mexican imports.
🎯
Portfolio Transformation
Divested SVEDKA (Jan 2025) and mainstream wines (June 2025). Now premium/high-end only. Prisoner, Robert Mondavi, Kim Crawford, High West, Casa Noble.
📈
Upside Catalysts
Modelo #1 at 10% share (2pts ahead). 49/50 states growing. Sunbrew #1 new brand, #4 share gainer. Margins 39-40% best-in-class. $500M+ savings. 2x Gen Z share. Loyalty rising. Wine beat market 6 months straight.
⚠️
Risk Factors
80% consumers worried, 70% personal finance concerns. Unprecedented volatility. High Hispanic zips way worse. CA jobs not happening. Q2 inventory rebalance. Corona Extra challenged. Tariffs $70M beer/$20M wine. Gen Z 2x unemployment.

📊 Q2 FY2026 "Consumer Sentiment Crisis, Inventory Rebalance" Performance

Distributor Inventory Rebalancing in Q2, Ship-Depletion Gap, 80% Consumers Cite Socioeconomic Concerns, High Hispanic Zip Codes Significantly Worse, Modelo #1 at 10% Share, Wine Beats Market 6 Months, Cautiously Optimistic Bottom Reached

🍺
10%
Modelo Market Share
#1 Brand, +2pts vs #2
😟
80%
Consumer Concerns
Socioeconomic Worries
💰
$500M+
Cost Savings Since ID
$105M YTD FY26
📦
Q2
Inventory Rebalancing
Distributor Levels Good

📞 Key Q2 FY2026 Earnings Highlights

😰
Consumer Sentiment Crisis
80% consumers worried about socioeconomic environment (monthly study). 70% concerned personal finances = cyclical not structural. Unprecedented volatility, mixed results. High Hispanic zips way worse vs general market.
🏆
Modelo Dominance Continues
Modelo #1 US beer by dollars at ~10% share (2 full pts ahead of #2). Loyalty up with Hispanic consumers. On-premise jumped #5 to #2 in draft. Growing 49/50 states. Strong equity enables pricing power.
📦
Q2 Inventory Rebalancing
Overshipped Q1/Q2 ahead of summer as typical. Summer takeaway below expectations = distributor buildup. Pulled Q3 rebalancing into Q2. Distributor inventory now at good levels. No retailer destocking. Still gaining shelf space.
🍷
Wine Beats Market 6 Months
Beat market 6 straight months. Q2 up 2% apples-to-apples (Kim Crawford, Meiomi). 12-wk: Ruffino +2pts, Prisoner +4, Unshackled +11, Harvey & Harriet +23. Inventory good. Premium focus working.

📍 CEO Commentary: "80% consumers worried about socioeconomic environment. 70% concerned about personal finances = cyclical not structural. Consumer base pulling back" - Newlands. "Cautiously optimistic hit bottom" but "unprecedented volatility, very mixed results." California biggest problem.

🎯 Innovation & Brands: Corona Sunbrew #1 new brand, #4 share gainer (consumers mixing OJ+Corona = insight). Familiar top share gainer. Corona Extra provides halo despite challenges. Corona loyalty up. 2x Gen Z share vs industry. No marketing cuts planned.

🚀 Cost Savings: $65M Q2, $105M YTD, $500M+ since investor day. Builder to operator evolution continues. Supplier optimization, 60-ft rail cars, double stacking. Beer margins 39-40% best-in-class. Tariffs ~$70M beer, ~$20M wine annually.

🔮 Strategy & Outlook: Price pack architecture key - ensure affordability at all price points. Repositioned Modelo Especial & Premier lower for light beer segment. Premier early results positive. FY26 guidance maintained = confidence. Ships/depletes align H2. No radical change expected but watching volatility.

🚀 Why STZ Bulls Are Right
🏆
Modelo Unmatched Dominance
Modelo #1 at 10% share, 2pts ahead of #2. Loyalty rising with Hispanic consumers. On-premise jumped #5 to #2 in draft. Growing 49/50 states. Pricing power market-by-market. Perpetual exclusive US rights.
🚀
Innovation Portfolio Wins
Corona Sunbrew #1 new brand, #4 share gainer (OJ-Corona consumer insight). Familiar top share gainer. Corona loyalty up. 2x Gen Z share vs industry. Corona Extra halo strong. No marketing cuts.
💎
Wine Momentum Building
Beat market 6 straight months. Q2 up 2% (Kim Crawford, Meiomi). 12-wk: Ruffino +2pts, Prisoner +4, Unshackled +11, Harvey & Harriet +23. Inventory good. Premium strategy working.
⚙️
Operational Excellence
$500M+ saved since investor day ($105M YTD). Beer margins 39-40% best-in-class. Builder to operator transition. 60-ft rail cars deployed. Ongoing supplier optimization. Cyclical not structural.
🐻 Why STZ Bears Have Valid Concerns
😰
Consumer Sentiment Collapse
80% consumers cite concerns. 70% worried personal finances. Unprecedented volatility. High Hispanic zips way worse. CA construction jobs missing. Fewer trips, less hosting.
📉
Volume Pressure Persists
Q2 needed inventory rebalancing after weak summer. Only "cautiously optimistic" bottomed. Corona Extra challenged. Gen Z 2x unemployment. No radical H2 improvement expected. Ships/depletes just aligning.
💸
Margin Pressure Building
H2 faces 100bps fixed overhead hit, 60bps tariffs (~$70M beer, ~$20M wine). H2 lower margin period (volume, maintenance). 39-40% margin sustainability questioned if volumes stay down. Deleverage risk.
🎯
Structural Risk Concerns
Beer category declining 15+ years. Share gain pace slowed. GLP-1 and cannabis substitution rising. Health/wellness favors RTDs. Younger consumers drinking less. Price pack moves signal desperation?

This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.