Constellation Brands(US:STZ) The Motley Fool·2025-12-14 08:50Core Viewpoint - Constellation Brands is facing significant challenges, including declining sales and rising tariffs, but there are signs that the stock may be oversold, potentially leading to a recovery in 2026 [1][9]. Company Performance - In the first half of fiscal 2026, Constellation Brands reported net sales of $5 billion, a decrease of over 10% compared to previous periods [4]. - The company earned $982 million during this period, an increase attributed to a goodwill impairment of nearly $2.3 billion in the first half of fiscal 2024 [4]. - The stock has lost almost 35% of its value over the last year [4]. Market Position - The current market capitalization of Constellation Brands is $26 billion, with a current stock price of $147.42 [5][6]. - The stock has a 52-week range of $126.45 to $240.32, indicating significant volatility [6]. Valuation and Dividends - The goodwill impairment has raised the price-to-earnings (P/E) ratio to 21, but the forward P/E of 13 is considered low [7]. - Constellation Brands has consistently paid and increased its dividend since 2015, with a current annual payout of $4.08 per share, resulting in a dividend yield of 2.8% [7]. Cash Flow and Share Buybacks - The company is projected to generate between $1.3 billion and $1.4 billion in free cash flow in fiscal 2026, sufficient to cover its annual dividend cost of approximately $725 million [8]. - The outstanding share count has decreased by over 3% in the last year, which may enhance the potential for share price recovery [8]. Future Outlook - Despite concerns over declining alcohol consumption and rising tariffs, the stock's 40% decline suggests that investors may have overreacted [9]. - Buying Constellation stock now allows investors to enter at a low valuation while benefiting from a high and rising dividend return, which could increase demand for shares [10].