STZ

Constellation is a high-quality, cash-generative beverage operator: FY2026 gross margin of 51.6%, operating margin of 29.8%, and ROE of 20.9% reflect a durable, pricing-led franchise anchored by its high-end imported beer portfolio. The headline +2,172% jump in net income to $1.69B is misleading, however — it is mostly the absence of last year's charges. FY2025 swung to a -$81.4M loss because of a $2,740.7M Wine & Spirits goodwill impairment (written to zero) plus a $57.0M trademark impairment, both disclosed in the MD&A. Normalizing for that, this is a recovery to baseline profitability, not organic growth.

The real concern is the top line. Revenue fell -10.5% to $9.14B, reversing the prior trend (FY2024 $9.96B, FY2025 $10.2B), and gross profit dropped -11.3% while operating cash flow fell -15.3% to $2.67B. The MD&A is explicit that the Wine & Spirits segment faces 'continued negative trends' in the U.S. wholesale market, with declines in both the overall wine market and the company's mainstream/premium brands — a structurally shrinking division now carried at zero goodwill. Beer is the only growth engine, and management is funneling capex (~$762M of $875M FY2026, ~$800M planned FY2027) into Brewery Projects to support it.