Why Constellation Brands Stock Could Be a Top Value Pick Heading Into 2026

Core Viewpoint - Constellation Brands is currently undervalued in the market due to recent declines in consumer spending, presenting a unique opportunity for investors to acquire the stock at a high dividend yield and low free cash flow multiple [1] Sales Performance - The company experienced a 15% year-over-year decline in sales last quarter, primarily due to asset sales in the wine and spirits segment, while the beer segment, which constitutes 94% of total net sales, saw an adjusted sales decrease of 7% year over year [3] - Recent sales pressure is linked to cautious consumer spending, indicating a temporary dip rather than a permanent decline in brand positioning [5] Market Trends - Imported beer is gaining traction in the U.S. market, with nearly 18% of all beer consumed being imported, benefiting Constellation's portfolio that includes popular brands like Corona and Modelo [4] - The company's top beer brands gained dollar share in the U.S. market last quarter, with Modelo Especial leading in dollar sales [6] Financial Metrics - Despite lower sales, the company generated $634 million in free cash flow last quarter and over $1.8 billion on a trailing-12-month basis, allowing for an attractive price-to-free-cash-flow multiple of 13.8, significantly below the five-year average of 25 [8] - The dividend payout ratio was only 39% of free cash flow over the last year, with a current quarterly payment of $1.02, resulting in a forward dividend yield of 2.88%, more than double the S&P 500 average [9] Investment Opportunity - The current cyclical downturn presents a rare buying opportunity for investors to acquire a high-quality company at a bargain price, as such valuations are typically not available during periods of sales growth [10]