Constellation Brands (STZ): The King of Imported Beer Still Looks Undervalued

🏢 What It Does

Constellation Brands makes and sells beer, wine, and spirits — but its real strength is in premium imported beer.

It’s the exclusive U.S. importer and marketer of famous Mexican beers like Modelo, Corona, Pacifico, and Victoria. These are brewed in Mexico, but only Constellation can sell them in the U.S. under a perpetual license.

It also owns a smaller but growing wine and spirits business with brands like Robert Mondavi, The Prisoner, Kim Crawford, and High West whiskey.

Most of its profit (about 90%) comes from the beer segment.

💰 How It Makes Money

Beer sales in the U.S. through grocery stores, bars, and restaurants.
Earns profit through brand power and pricing — people pay more for Corona and Modelo because they’re premium imports.
Distribution scale — large breweries in Mexico and a big U.S. logistics network keep costs lower per unit.
Wine & spirits bring smaller but steady cash flow after cutting weaker brands.

🧱 Moat (Competitive Advantage)

Exclusive U.S. rights to Corona and Modelo — competitors can’t touch these brands in the U.S.
Strong brand loyalty — Modelo and Corona are top 5 beers in the U.S., with Modelo recently becoming #1.
Scale & efficiency — its Mexican breweries and U.S. distribution system are expensive to copy.
Premium positioning — consumers associate these beers with quality and lifestyle, giving pricing power even in weak economies.

These advantages make STZ very hard to disrupt, giving it a wide moat.

📊 Key Metrics (FY2025–2026 estimates)

Metric	Latest or Approx.	Comment
Revenue	$9.6B	Mostly beer sales
Free Cash Flow Margin	19.20%	Strong profitability for consumer staples
ROE (Return on Equity)	15.91%	Solid equity growth
ROIC (Return on Invested Capital)	10.32%	Above its cost of capital (~6–7%) — value-creating
Debt / EBITDA	2.91	On the high side, but acceptable
Interest Coverage	>7×	Easily covers debt payments
Free Cash Flow	~$1.3–1.4 B expected FY26	After about $1.2 B capex for brewery expansion
Dividend Yield	~1.4%	Regular dividends plus buybacks

⚖️ Financial Health

Debt: Around $10.54 B total, but offset by predictable beer cash flow and good credit ratings.
CapEx: High now due to expansion in Mexico, but expected to drop later — improving FCF.
Buybacks: Occasional share repurchases when leverage allows.

📈 My Fair Value vs Market

My estimated fair value: $192 per share
Recent price: around $140–150
➡️ That means STZ looks undervalued by about 25–30% based on your model.

This assumes moderate earnings growth, stable margins, and continued brand strength in the U.S. beer market.

🧭 Bottom Line

Constellation Brands is a premium beer powerhouse with long-lasting brand rights, efficient scale, and steady cash flow.
Even though short-term sales dipped due to softer demand and tariffs, its moat and balance sheet remain strong.

At a fair value of $192, the stock offers a margin of safety if you believe in the long-term growth of Modelo and Corona in the U.S.