CONSTELLATION BRANDS, INC. (STZ) — Fundamental Analysis

Constellation Brands is a major beer, wine, and spirits company best known for its high-margin Mexican beer portfolio — Corona, Modelo, and Pacifico — sold in the United States. The big picture is this: the core business is genuinely strong, with gross margins consistently above 50% and solid operating cash generation, but the headline numbers have been obscured in recent years by large non-cash impairment charges (primarily on its wine and spirits segment) that repeatedly dragged net income into negative territory. Strip those out and the operating engine looks healthy. FY2026 (ended February 2026) showed a meaningful step forward in reported profitability, with net margin recovering to roughly 18.5%. The most recent quarter (ended May 2026) is the brightest data point in years — margins hit multi-year highs and capital spending came down sharply. The main concern is a debt load that remains elevated relative to equity, and revenue growth has been essentially flat over the past three to five years. This is a mature, cash-generative business navigating a portfolio transition rather than a high-growth story.

Snapshot & Big Picture

Constellation Brands operates in a concentrated niche: it holds the U.S. import rights to several of Mexico's most popular beer brands, which generate premium pricing and consistently strong margins. The wine and spirits segment has been a drag — the company has taken repeated impairment charges on those assets over the past several fiscal years, distorting net margins badly in FY2020, FY2022, FY2023, and FY2025. In FY2025 specifically, revenue dipped to $10.2B with an EBITDA margin collapse to under 8% and a slightly negative net margin, reflecting a large goodwill/impairment charge. FY2026 saw revenue pull back further to $9.1B — partly reflecting ongoing wine and spirits divestitures — but operating and net profitability recovered sharply, suggesting the impairment noise is fading. The beer business remains the engine, and the company has been deliberately shedding lower-margin wine brands to simplify and focus the portfolio.

Latest Quarter Snapshot

The quarter ended May 31, 2026 — the most current data available, filed July 1, 2026 — is notably strong and more encouraging than any single annual period in recent memory. Revenue came in at $2.43B for the quarter. Gross margin reached 54.3%, the highest level in this dataset, and operating margin hit 34.7% while net margin came in at 26.9%. EBITDA for the quarter was $943M. Importantly, capital expenditures dropped to $177M (7.3% of revenue), the lowest capex-to-revenue ratio in the dataset, suggesting the heavy brewery investment cycle may be moderating. The current ratio slipped to 0.91, meaning current liabilities modestly exceeded current assets — worth watching but not alarming given the company's cash generation capacity. The debt-to-equity ratio of 1.24x is broadly in line with the full-year FY2026 reading.

Profitability

Gross margins have been remarkably stable, oscillating in a tight band between roughly 48% and 54% over the past decade, and have trended slightly upward as the higher-margin beer segment grows as a share of the mix. The more volatile metric is net margin, which has been whipsawed by impairment charges: five of the past ten fiscal years produced negative or near-zero net margins despite solid operating performance. When those charges are absent — as in FY2018, FY2019, FY2021, FY2024, and FY2026 — net margins are healthy, ranging from 17% to over 40% (the FY2019 figure was boosted by a one-time gain). FY2025's EBITDA collapse to just $802M (vs. $3.1–$3.6B in surrounding years) reflects the scale of that year's charges. The recovery in FY2026 and the strong Q1 FY2027 print suggest the impairment cycle tied to wine and spirits write-downs may be largely behind the company.

Financial Health

Constellation's balance sheet carries a meaningful debt load. The debt-to-equity ratio has ranged from 0.77x to 1.55x over the past decade, sitting at 1.27x as of FY2026 year-end and 1.24x in the latest quarter. This leverage is manageable given the business's consistent EBITDA generation — in normal years (ex-impairment), EBITDA runs $2.5–$3.6B — but it does limit financial flexibility and makes the company more sensitive to interest rate movements. The current ratio recovered to 1.08x at FY2026 year-end after dipping below 1.0x in FY2025, though it slipped back to 0.91x in the May 2026 quarter.

Capital expenditure has been a defining feature of this business. STZ has consistently invested 9–13% of revenue back into its physical infrastructure — primarily its brewery operations in Mexico — reflecting the capital intensity of beverage manufacturing at scale. Annual capex ranged from $726M (FY2020) to $1.27B (FY2024), with the peak investment years of FY2023–FY2025 corresponding to major brewery expansion projects. There are early signs of a capex moderation cycle: FY2026 capex fell to $875M (9.6% of revenue), and the most recent quarter's annualized run rate implies capex could drop further toward 7–8% of revenue. If sustained, lower capex would meaningfully improve free cash flow conversion — a positive signal for shareholder returns and debt reduction.

Growth

Revenue growth at Constellation Brands has slowed considerably over the measurement windows available. The 10-year CAGR is not available — the dataset only extends back to the fiscal year ending February 2017, which provides just under 10 years of data but does not constitute a full 10-year window as calculated from the source data. The 5-year CAGR is a modest +1.2% annually from FY2021 to FY2026, and the 3-year CAGR is slightly negative at -1.1% from FY2023 to FY2026, largely reflecting the deliberate divestiture of wine and spirits brands that reduced reported revenue. This is not a growth story by revenue metrics — it is a margin and cash-flow story, where the mix shift toward beer is designed to improve quality of earnings rather than top-line size.

The near-flat to slightly negative revenue trajectory over three and five years reflects a business in active portfolio restructuring rather than organic stagnation. The beer segment itself has been growing; the headline revenue compression comes from shedding wine and spirits assets. Whether the beer segment can sustain meaningful volume growth — in a category facing broader consumer demand questions — is the key forward-looking question for the growth narrative.

Source Filings

• Form 10-Q — Filed July 1, 2026 (Period ending May 31, 2026)
• Form 10-K — Filed April 22, 2026 (Fiscal Year ending February 28, 2026)