Constellation Brands (STZ): A strong start to FY27 with a healthy FQ1 beat; Guidance prudently maintained, but likely conservative - Reiterate Buy

研报英文原文证据摘录

Constellation Brands (STZ): A strong start to FY27 with a healthy FQ1 beat; Guidance prudently maintained, but likely conservative - Reiterate Buy

d (beer marketing expenses

were ~9% of sales in FQ1).

That said, we recognize the many challenges inherent in today’s operating/macro

backdrop create continued uncertainty - with mgmt noting that consumer purchasing

behavior remained dynamic throughout FQ1 as financial pressures on the consumer

driving a more value-conscious consumer mindset, notably within lower-income

households. Further, we note that Beer margins are expected to be under pressure this

year - which remains an area of focus for investors - weighed by costs associated with

STZ’s new Veracruz brewery (which is expected to begin production in the middle of this

fiscal year), increased SG&A expenses (y/y) related to lower incentive comp in FY26, and

incremental marketing investment (especially in FQ2 & FQ3) as STZ continues to manage

the business for the long term. As an offset, however, mgmt expects to realize some

benefit from pricing (mgmt expects price realization of ~+1% to 2% - albeit towards the

lower end), the company’s cost savings agenda and relief from aluminum tariffs this year.

As such, we think STZ’s FY27 beer operating margin guidance of 37% to 38% could

ultimately prove conservative - particularly considering the strong FQ1 margin delivery

(39.0%).

Beyond this, we continue to think investors are under-appreciating STZ’s strong FCF

profile - with the company generating $1.79B in FY26, far surpassing its guidance of

$1.3-$1.4B. Additionally, we expect capital expenditure spending to decelerate as a

percentage of sales going into FY27 and FY28, particularly as the initial phase of STZ’s