Breaking Down Constellation Brands, Inc. (STZ) Financial Health: Key Insights for Investors

You're looking at Constellation Brands, Inc. (STZ) and trying to reconcile the massive strength of its Beer division with the persistent drag from Wine and Spirits-it's a classic two-speed business model that requires a defintely nuanced view.

The core story remains the Beer business, which delivered its 15th consecutive year of volume growth in fiscal year 2025, driving a nearly 5% increase in dollar sales and cementing Modelo Especial's position as a US market leader. But the headline number that really matters is the cash generation: the company pulled in a strong $3.2 billion in operating cash flow for FY2025, which is what fuels the shareholder return strategy that saw nearly $1.9 billion returned to you and other investors through dividends and buybacks.

Still, you can't ignore the structural challenges in the legacy business, evidenced by the non-cash goodwill impairment charge of up to $2.5 billion recorded in the Wine and Spirits segment. That's a massive write-down, but the good news is the company's comparable earnings per share (Comparable EPS) guidance still landed between $13.50 and $13.80 for the fiscal year, showing the Beer segment's profitability is insulating the overall enterprise.

Revenue Analysis

You need to know where the money is actually coming from to understand Constellation Brands, Inc. (STZ)'s valuation, and the answer is simple: it's a beer company now, plain and simple. For the fiscal year ending February 28, 2025, Constellation Brands generated total annual revenue of approximately $10.21 billion, marking a year-over-year growth rate of 2.48%. That growth is defintely not evenly distributed across its businesses.

The core of the business is its imported Mexican beer portfolio. This segment is the primary engine, driving both sales and profitability, while the Wine and Spirits division continues to be a drag on overall performance. Here's the quick math on the segment contribution for the 2025 fiscal year:

• Beer Business: Contributed approximately $8.54 billion in revenue.
• Wine and Spirits: Contributed approximately $1.67 billion in revenue.

This massive skew in revenue contribution is the single most important factor for investors to consider. The company has essentially doubled down on its high-margin beer business, which is why the stock trades like a growth-oriented consumer staple.

The Shift in Revenue Streams

The composition of Constellation Brands' revenue has fundamentally changed over the past few years, a deliberate strategy to focus on premium, high-growth categories. The fiscal 2025 numbers solidify this shift, with the Beer segment now representing roughly 83.6% of total revenue, leaving the Wine and Spirits segment at just 16.4%. This is not just a trend; it's a structural re-alignment.

The Beer segment's dominance is fueled by powerhouse brands like Modelo Especial and Corona Extra, which continue to capture dollar share in the U.S. market. The Wine and Spirits segment, however, is facing persistent headwinds, particularly in the U.S. wholesale market for mainstream and premium wines. To be fair, management has been actively divesting lower-margin brands to clean up the portfolio, but the financial impact is clear.

The challenges in the Wine and Spirits business were so pronounced that the company recognized a non-cash goodwill impairment loss-a write-down of asset value-of between $1.5 billion and $2.5 billion in the second quarter of fiscal 2025. This signals management's updated, and less optimistic, outlook for that segment's future earnings power. You can read more about the investor base driving this valuation in Exploring Constellation Brands, Inc. (STZ) Investor Profile: Who's Buying and Why?

The table below breaks down the revenue contribution and growth story, showing the clear divergence between the two segments that defines the investment thesis for Constellation Brands, Inc. today.

Profitability Metrics

You're looking for a clear picture of Constellation Brands, Inc. (STZ)'s core financial health, and the margins tell the real story of operational efficiency. The headline for fiscal year (FY) 2025 is a sharp divergence: the Beer business is a powerhouse, but strategic restructuring in Wine and Spirits created a temporary drag on the reported bottom line.

For the full FY2025, which ended in February 2025, Constellation Brands, Inc. reported an annual gross profit of over $5.315 billion on total revenue of approximately $10.21 billion. This translates to a Gross Profit Margin of 52.06%. This is a phenomenal number, honestly, and it immediately sets Constellation Brands, Inc. apart from its peers. For context, the alcoholic beverage industry median Gross Margin is closer to 36.4%. This massive gap underscores the pricing power and superior cost structure of their high-end Beer portfolio.

Here's the quick math on the key FY2025 profitability ratios:

Margin Trends and Operational Efficiency

The reported Net Profit Margin of -0.80% for FY2025, which resulted from a reported net loss of $81.4 million, is not a sign of operational failure; it's the result of a deliberate strategic overhaul. This loss was primarily driven by non-recurring, non-cash charges, including a significant goodwill impairment loss tied to the divestiture of their mainstream Wine and Spirits (W&S) portfolio. The company is actively shedding lower-margin assets to focus on premiumization. This is a classic case where headline net income figures hide the true operating strength.

The real operational story is in the segment data. The Beer business is an efficiency machine, consistently guiding for an operating margin in the 39% to 40% range. This segment's strength is what keeps the overall Operating Margin at a respectable 19.5% for the full year, still above the industry median of 17.7%, despite the W&S drag. To be fair, the W&S segment faced double-digit declines in net sales and operating income in Q2 FY2025, which is why the full-year number isn't higher. The company is defintely committed to aggressive cost management, projecting over $200 million in annualized cost savings by fiscal 2028 from these restructuring actions. Strong gross margins are a core competitive advantage. For a deeper look at who is betting on this strategy, you should read Exploring Constellation Brands, Inc. (STZ) Investor Profile: Who's Buying and Why?

The near-term trend is positive, too. In the most recent quarter, Q2 FY2026 (ended August 2025), the Gross Margin actually climbed to 52.80%, showing that the core business is getting even more efficient.

• Monitor Beer business operating margin for stability (target: 39%-40%).
• Track progress on the $200 million cost savings initiative.
• Expect reported Net Income to normalize as non-recurring charges clear.

Debt vs. Equity Structure

You're looking at Constellation Brands, Inc. (STZ) because its growth profile, especially in the Beer division, is compelling. But that growth requires capital, and the way the company finances it-the debt-to-equity mix-is your key to assessing risk. The direct takeaway is this: Constellation Brands, Inc. runs with a significantly higher financial leverage than its peers, but its strong operating cash flow and recent debt management moves in 2025 are designed to keep that leverage manageable.

As of the end of fiscal year 2025 (February 28, 2025), Constellation Brands, Inc.'s total debt stood at approximately $12.11 billion. This is a substantial figure, but it's a necessary part of funding its massive brewery expansion projects. The composition of this debt shows a clear preference for long-term stability, which is smart for a capital-intensive business.

• Long-term Debt: Approximately $9.29 billion.
• Short-term Debt: Approximately $2.29 billion.
• Total Shareholders' Equity: Approximately $7.13 billion.

Here's the quick math on leverage: The company's Debt-to-Equity (D/E) ratio for the fiscal year 2025 was approximately 1.76. This means that for every dollar of shareholder equity, the company uses $1.76 in debt to finance its assets. That's high.

Leverage vs. Industry Benchmarks

To be fair, a 1.76 D/E ratio is not unusual for a company undergoing heavy capital expenditure, but it is a clear outlier in the alcoholic beverage sector. The average D/E ratio for the 'Beverages - Wineries & Distilleries' industry is closer to 0.42, and the median for the broader 'Beer, Wine, And Distilled Alcoholic Beverages' category in 2024 was around 0.64. Constellation Brands, Inc.'s ratio is nearly three times the industry median. This higher leverage posture is a calculated risk, reflecting their aggressive investment in the high-growth Beer segment, which you can read more about in the Mission Statement, Vision, & Core Values of Constellation Brands, Inc. (STZ).

Still, management is focused on discipline. Their stated long-term financial policy aims for a net leverage ratio (net debt-to-EBITDA) of 3.0x. This is the number that truly matters for credit health, and the company has been actively managing its debt to stay near that target.

2025 Debt Optimization and Credit Health

The company has been defintely busy on the capital structure front in 2025. In April 2025, Moody's Ratings upgraded Constellation Brands, Inc.'s senior unsecured ratings from Baa3 to Baa2. This is a significant vote of confidence, driven by the expectation that the company's debt-to-EBITDA leverage will remain stable and that its Beer business will continue to deliver strong margins.

Specific actions taken in 2025 demonstrate a clear strategy to swap short-term, higher-interest debt for longer-term, lower-rate financing:

• Refinancing for Duration: In late 2025, the company issued $500 million in 4.95% Senior Subordinated Unsecured Notes due November 2035, using the proceeds to redeem outstanding debt that was set to mature sooner.
• Early Redemption: They announced the full redemption of $900.0 million in aggregate principal amount of 4.75% Senior Notes due 2025 (redeemed in July 2025) and 5.00% Senior Notes due 2026.
• Divestiture Proceeds: The proceeds from the 2025 Wine Divestitures Transaction, which amounted to around $900.0 million, are explicitly earmarked for debt repayment and share repurchases. This is how they balance debt financing with equity funding-using debt for growth and using asset sales/cash flow to manage the debt load and return capital to shareholders.

The company is committed to debt-funded growth, but their recent moves show a disciplined approach to managing the maturity schedule and overall cost of capital. The immediate action for you is to monitor their quarterly net leverage ratio against that 3.0x target; sustained deviation above 3.25x could signal a change in risk profile.

Liquidity and Solvency

You need to know if Constellation Brands, Inc. (STZ) can cover its short-term bills, especially as they continue to invest heavily in their Beer Business. The quick answer is that while their cash on hand and immediate assets are tight for a company of this size, their powerful cash flow from operations provides a strong backstop.

The company's liquidity position, measured by its current and quick ratios, is relatively lean. As of the fiscal year end in February 2025, Constellation Brands, Inc. (STZ) had a Current Ratio of 0.92. This means that for every dollar of current liabilities (bills due within a year), the company had only $0.92 in current assets to cover it. The Quick Ratio (or acid-test ratio), which strips out inventory-a less liquid asset for a beverage company-was 0.56 for the same period. To be fair, a ratio below 1.0 isn't a red flag for every industry, but it does mean they rely on converting inventory or generating fresh cash flow quickly. This is a capital-intensive business, so they run lean on the balance sheet.

Here's the quick math on their working capital trends: the company saw a significant shift from a positive working capital of approximately $587.8 million in the prior year to a deficit of about $318.8 million in fiscal year 2025. This negative working capital position signals that current liabilities now exceed current assets, which is a key change to monitor. This decrease is largely due to strategic uses of cash and changes in the balance sheet structure, not necessarily a sign of distress, but it does reduce the margin of safety.

• Current Ratio (FY 2025): 0.92
• Quick Ratio (FY 2025): 0.56
• Working Capital (FY 2025): -$318.8 million

The true strength of Constellation Brands, Inc. (STZ)'s financial health lies in its cash flow statement. In fiscal year 2025, the company generated robust Net Cash from Operating Activities (OCF) of approximately $3.2 billion, representing a 13% increase over the previous year. This consistent, high-margin cash generation from the core Beer Business is what ultimately mitigates the tight liquidity ratios. It's a very strong engine.

The cash flow overview for the year shows a clear capital allocation strategy:

The primary liquidity strength is the massive operating cash flow, which easily covers the net outflow in investing activities, leaving ample cash for financing activities like dividends and share buybacks. The potential liquidity concern is not a lack of cash generation, but the deliberate choice to run a lean balance sheet to maximize capital efficiency, as outlined in their Mission Statement, Vision, & Core Values of Constellation Brands, Inc. (STZ).

The key action for you is to monitor the OCF-to-CapEx ratio. As long as operating cash flow remains strong and easily funds the necessary capacity expansion-which is critical for their growth story-the low current and quick ratios are defintely manageable. If OCF growth slows, that's when the tight liquidity becomes a material risk.

Valuation Analysis

You're looking at Constellation Brands, Inc. (STZ) and wondering if the recent stock volatility means it's a bargain or a value trap. Honestly, the valuation picture is complex right now, and it defintely requires looking past the headline numbers to see the true cost of the beer and spirits business.

The direct takeaway is this: Constellation Brands, Inc. (STZ) appears undervalued based on forward earnings and analyst consensus, but the trailing-twelve-month (TTM) metrics are skewed by a challenging fiscal year. The stock has been hammered, losing nearly 47% over the last 12 months, which has created a potential buying opportunity if you believe in their core beer business growth.

Is Constellation Brands, Inc. (STZ) Overvalued or Undervalued?

The stock's performance over the last year is a big red flag for some, but a green light for others. The closing price around November 20, 2025, was approximately $130.45, a steep drop from the 52-week high of $245.31 set back in December 2024. This massive decline, a loss of over 46.63% in 12 months, is what makes the current valuation so compelling-or concerning, depending on your outlook.

Here's the quick math on the key valuation multiples for Constellation Brands, Inc. (STZ) as we close out 2025:

• Price-to-Earnings (P/E) Ratio: The TTM P/E is around 19.18x. But here's what this estimate hides: the reported P/E for the full 2025 fiscal year is a negative figure (around -390x) due to a reported negative Earnings Per Share (EPS) of -$0.45. This means the company technically lost money on a GAAP basis, so the P/E ratio is meaningless.
• Forward P/E Ratio: This is where the opportunity lies. Analysts are forecasting a significant rebound, putting the forward P/E (based on fiscal year 2026 estimates) at a much more attractive 12.6x. That's a strong signal of expected earnings recovery.
• Price-to-Book (P/B) Ratio: The current P/B is approximately 3.02x. This is a reasonable figure for a consumer defensive stock with strong brand equity like Corona and Modelo, suggesting the market values the company's net assets at three times their book value.
• Enterprise Value-to-EBITDA (EV/EBITDA): The current EV/EBITDA is sitting at about 9.10x. This is below the company's median of 19.92x over the past 13 years, and significantly lower than the 15.6x average seen in fiscal year 2024. This multiple is a cleaner measure because it strips out the noise from debt and non-cash expenses, and it suggests the company is currently inexpensive relative to its operating cash flow.

Dividend and Analyst Sentiment

The company continues to reward shareholders even through a tough year. Constellation Brands, Inc. (STZ) pays an annual dividend of $4.08 per share, resulting in a dividend yield of approximately 3.16% as of November 2025. The Payout Ratio-the percentage of earnings paid out as dividends-is around 59.24% on a TTM basis. This level is sustainable and shows management is still confident in future cash flow, as a sub-60% ratio leaves plenty of room for reinvestment or dividend growth.

The Wall Street consensus is generally bullish, which is a good sign for a beaten-down stock. The average analyst consensus rating is a 'Buy'. The average price target from analysts is approximately $178.85, which implies a potential upside of over 32% from the current stock price. This sentiment is built on the strength of their beer portfolio and the long-term premiumization trend, which you can read more about in their Mission Statement, Vision, & Core Values of Constellation Brands, Inc. (STZ).

To be fair, there are a few 'Hold' and 'Sell' ratings mixed in, with some analysts lowering their price targets to as low as $135 due to concerns over macroeconomic headwinds and the potential impact of GLP-1 drugs on alcohol consumption. The market is clearly mapping out near-term risks, but the majority see a path to a much higher valuation.

The table below summarizes the key metrics that point to a potential undervaluation:

My advice: The stock is cheap on a forward earnings and EV/EBITDA basis, but you need to be comfortable with the volatility that comes from a major price correction and the negative sentiment around the 2025 GAAP earnings. The risk is that the beer volume growth estimates for fiscal year 2026 prove too optimistic.

Next step: Dig into the Q2 2026 Beer Business report, which showed a 7% net sales decline, and see if management's belief that socio-economic challenges are temporary holds up.

Risk Factors

You're looking at Constellation Brands, Inc. (STZ) and seeing the strength of their beer business, but you have to be a realist: the company is not without its near-term risks. The biggest challenge isn't the competition; it's the structural imbalance between their two main segments.

The core issue is a massive strategic risk: Constellation Brands, Inc. is heavily dependent on the success of its Mexican beer brands in the U.S. market, which represents the vast majority of its business. If consumer preferences shift away from high-end imported lagers, the entire financial model faces a serious headwind. Honestly, that's the one thing that keeps me up at night.

Operational and Financial Headwinds

The most immediate financial pain point in fiscal year 2025 was the Wine and Spirits segment. The company had to recognize a substantial goodwill impairment loss of approximately $2.74 billion as of August 31, 2024, which is a clear signal of underlying distress in the mainstream and premium wine categories. This impairment was a direct result of continued negative trends in the U.S. wholesale market.

Here's the quick math on the segment's projected struggles for FY2025: Wine and Spirits net sales were expected to decline by (6)% to (4)%, with operating income projected to fall even more sharply, between (18)% and (16)%. That's a serious drag on the overall enterprise, even with the Beer segment's projected net sales growth of 6% to 8%.

Beyond the segment-specific issues, you also need to track external operational and financial risks:

• International Tariffs: Since Constellation Brands, Inc. has production facilities in Mexico, New Zealand, and Italy, it is exposed to economic uncertainties and the risk of new duties or excise taxes on beverage alcohol products.
• Indebtedness and Rates: The company uses debt to fund expansion and share repurchases, making it vulnerable to interest rate fluctuations. They did, however, reduce their comparable net leverage ratio to under 3.0x in Fiscal 2025.
• Labor Activities: Potential labor strikes or work stoppages could disrupt operations at their production facilities, leading to higher ongoing labor costs or reputational harm.

Mitigation Strategies and Clear Actions

The good news is that management isn't ignoring the Wine and Spirits weakness; they are executing a clear, decisive strategic shift. Their mitigation plan is to reposition the Wine and Spirits portfolio to focus exclusively on higher-end brands, priced predominantly at $15 and above, to chase higher growth and better margins beyond Fiscal 2026. This included a major divestiture of mainstream wine brands to The Wine Group in 2025.

To protect the Beer segment's dominance, they are committing capital to capacity expansion, notably the modular development of their third brewery in Veracruz, Mexico, and additions to existing facilities. This investment is supported by strong cash generation, with the company producing $3.2 billion in operating cash flow in Fiscal 2025, a 13% increase year-over-year.

For investors, the company has also authorized a share repurchase program of up to $4.0 billion under the 2025 Authorization, which expires in February 2028. This is a defintely a way to return capital and signal confidence in the stock's valuation, which was around $38.5 billion in aggregate market value for non-affiliate common equity as of the end of the second fiscal quarter.

You can dive deeper into the full financial picture by reading Breaking Down Constellation Brands, Inc. (STZ) Financial Health: Key Insights for Investors.

Growth Opportunities

You need to know where the next dollar of growth is coming from, and for Constellation Brands, Inc. (STZ), that answer is simple: premium beer. The company is doubling down on its core strength, which is why it projects its comparable earnings per share (EPS) for fiscal year 2025 to land between $13.60 and $13.80. That's a powerful signal, even with the Wine and Spirits segment facing headwinds.

The core strategy is all about premiumization-moving the portfolio toward higher-margin products. Honestly, the beer business is carrying the load, and it's a heavy one, making up roughly 83% of total sales. The Wine and Spirits business is still undergoing a portfolio reset, reflected in an expected non-cash goodwill impairment loss of between $1.5 billion and $2.5 billion for the year. What this estimate hides is the strategic benefit of shedding lower-end assets to focus on high-growth, high-margin brands.

Key Growth Drivers and Financial Projections

The engine of Constellation Brands, Inc.'s growth is its Mexican import beer portfolio. Modelo Especial is now the top-selling beer in the U.S., which is a massive competitive advantage. The company is capitalizing on favorable U.S. beer trends, including the growing Hispanic consumer demographic, which is defintely a tailwind for brands like Modelo and Corona.

Here's the quick math for fiscal year 2025, showing the clear divergence between segments:

To support this beer growth, Constellation Brands, Inc. is investing heavily in capacity, specifically the modular development of its third brewery in Veracruz, Mexico. Plus, they are targeting significant cost savings. A restructuring program is set to deliver over $200 million in savings by fiscal year 2028, with $55 million expected to be realized in FY25 alone.

Strategic Initiatives and Competitive Edge

The company's competitive advantage boils down to its brand power and control over the U.S. distribution of its Mexican beer portfolio. They are the number one leader in the imported beer segment. To be fair, the market is getting tougher, so innovation is key.

Strategic initiatives driving future growth include:

• Product Innovation: Launching new products like Modelo Spiked Aguas Frescas and Corona non-alcoholic options to capture evolving consumer tastes.
• Portfolio Refinement: Reshaping the Wine & Spirits portfolio toward premium labels like The Prisoner Wine Company and Kim Crawford, which carry higher margins.
• Omnichannel Investment: Enhancing direct-to-consumer (DTC) capabilities and expanding the global footprint to meet younger, tech-savvy audiences.
• Capital Allocation: Maintaining strong cash generation, with operating cash flow expected between $2.8 billion and $3.0 billion, which funds both brewery investments and shareholder returns.

The company's focus on fewer, stronger brands and disciplined capital deployment provides a solid foundation for sustainable growth, even as macroeconomic headwinds persist. You can see their long-term focus on brand equity by reading their Mission Statement, Vision, & Core Values of Constellation Brands, Inc. (STZ).