The Brews, the Booze, and the Bottom Line: Why Constellation Brands is a Must-Buy Now!

Let me tell you, folks, there’s a reshaping revolution happening in the alcohol industry—and Constellation Brands (STZ) is leading the charge. This isn’t just about selling beer; it’s about betting big on premiumization, cutting the fat, and positioning itself to dominate where consumers are spending their money. And right now? The data screams BUY.

The Beer Business: A Growth Machine on Steroids

Constellation’s beer segment is firing on all cylinders. Take Modelo Especial: up 12% in the U.S. in 2024, it’s now the top-selling beer by dollar sales. Meanwhile, Pacifico and Modelo Chelada hit 20 million cases in trailing sales—proof that the “better-for-you” and spicy chelada trends are here to stay.

But here’s the kicker: Constellation isn’t just selling volume. It’s pricing for premium. Beer operating margins hit 38.5%, up 100 basis points, thanks to smart marketing, cost efficiencies, and inflation-beating strategies. And with plans to boost Mexican production capacity to 55 million hectoliters by 2028, they’re setting the table for even more growth.

The Wine Divestiture: A Strategic Masterstroke

Now, let’s talk about Constellation’s controversial move to sell its mainstream wine brands like Woodbridge and Meiomi to The Wine Group. On the surface, this looks like cutting losses—after all, its wine division faced a 7-9% sales decline in 2024. But dig deeper:

• Focus on the $15+ premium brands: Retained jewels like The Prisoner, Robert Mondavi, and Casa Noble tequila are where the profit margins live.
• Cost savings bullseye: The reorganization aims for $200M+ annual savings by 2028, freeing cash to fuel beer growth and premium spirits.

As CEO Bill Newlands put it: “We’re aligning with where the consumer is going.” And that’s upmarket.

The Numbers That Matter

Let’s get to the brass tacks:
- 2024 EPS guidance raised to $9.15–$9.35, with Q3 comparable EPS hitting $3.19—a 12% jump year-over-year.
- Free cash flow projected at $1.4–$1.5B, enough to fund dividends and buybacks while expanding capacity.
- Shareholder returns: A $0.89 dividend and $215M in buybacks already this year, with more to come.

Even through the Q4 2025 net loss of $375M (due to wine-related goodwill impairments), comparable EPS rose to $2.63—a sign that core operations are still humming.

Risks? Sure. But the Reward Outweighs Them

Critics will point to the wine division’s struggles and the need for regulatory approval on the Wine Group deal (expected by early 2026). But here’s the truth:
- Beer is the cash cow, and it’s growing faster than the broader CPG sector—by 3 percentage points, according to fiscal 2025 updates.
- Premium brands are recession-resistant: When budgets tighten, consumers cut cheap swill, not high-end spirits or craft beers.

The Bottom Line: Buy Now, Sit Back, and Smile Later

This isn’t just a stock; it’s a premium play on a global shift. Constellation is shedding the duds, doubling down on what works, and sitting on a fortress of cash flow. With beer dollar share up 1.3 points in 2025—making it the third-largest gainer in the entire beverage industry—this isn’t a fad.

Initiate a Strong Buy on Constellation Brands (STZ). Set a target of $220+ (based on 2025 EPS guidance and historical P/E multiples), and hold onto it like it’s the last Corona on a beach in Cabo. The premium train is leaving the station—get on board!

Disclosure: This is not financial advice. Consult your advisor before investing.