Should you sell your Constellation Brands stock?

Roth Capital Markets analyst Bill Kirk reiterated his “Buy” rating and US$209 target price on Constellation Brands (Constellation Brands Stock Quote, Chart, News, Analysts, Financials NYSE:STZ) in an Oct. 8 update, saying second-quarter results cleared a low bar but highlighted ongoing concerns around distributor inventory levels and slowing shipment trends.

Victor, N.Y.–based Constellation produces, markets, and distributes beer, wine and spirits under brands including Modelo, Corona, and Kim Crawford.

Kirk said second-quarter results were “surprisingly to the upside,” with adjusted EPS of US$3.63 versus consensus at US$3.38, but noted that unchanged full-year guidance implies margin upside in Q2 will be offset by pressures in the back half of the year. Management described itself as “cautiously optimistic” that the worst volume performance is behind them, with easier prior-year comparisons approaching.

Beer shipments fell 8.7% year over year, while depletions declined 2.7%. Net sales in the beer segment came in at US$2.35-billion, part of US$2.48-billion consolidated sales, modestly ahead of Street expectations. The quarter marked the third period of negative depletions since fiscal 2010. Kirk flagged a structural risk in distributor behaviour, noting that many wholesalers have historically carried twice as many days of inventory for Mexican imports like Modelo and Corona compared to premium light beers.

“With growth absent, distributors could question the need to tie up so much cash,” he said, pointing to NBWA data showing September distributor orders contracting to their weakest level since April 2020 shipment disruptions.

Constellation reiterated its fiscal 2026 guidance: beer net sales growth of –4% to –2%, wine and spirits net sales down 17% to 20%, and consolidated net sales down 6% to 4%. Adjusted EPS is expected to be US$11.30–US$11.60, down from US$13.78 last year. Operating cash flow is projected at US$2.5–US$2.6-billion.

Kirk forecasts Constellation will generate US$3.39-billion in Adjusted EBITDA on revenue of US$9.11-billion in fiscal 2026, improving to US$3.82-billion in EBITDA on US$9.29-billion in fiscal 2027.

He said the company continues to gain market share in most beer markets, but highlighted softening high-end buy rates, ongoing distributor rebalancing and macro headwinds as factors likely to pressure results in the near term. Even so, he maintains a positive view, citing stabilizing trends, cost savings initiatives, and improving comparables into the second half.

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