STZ: Quick Take on Earnings

Research evidence excerpt

STZ: Quick Take on Earnings

Constellation Brands, Inc.

wine trends post divestiture. Our price target and implied return support our Outperform rating.

Risks to rating and price target

1. Slowdown in beer portfolio: If overall category weakness escalates or seltzers (other than Corona) begin taking more share

from imports, STZ’s portfolio could slow.

2. Mexico’s production issues and/or tariffs: STZ’s beer products are produced in Mexico. Reduced production capacity or tariffs

on imports could weigh on STZ’s sales/profitability.

3. Profit-squeezing innovation required to grow in wine: Innovation may be the way to grow volumes in the wine category, but

if it were to require a higher level of brand support than expected, margins could become compressed.

4. Unfavorable cannabis regulation: A lack of regulatory easing could limit growth potential, making the purchase price look

expensive. We also point out that there are relatively low barriers to entry, so it’s possible for pricing/margins to become an

issue down the road.

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