Should you Avoid Constellation Brands Stock, Even at a 52-Week Low?

Shares of Constellation Brands (NYSE: STZ) have dropped 53% from their high to around $128, sitting just above a 52-week low of $126.45. The slide reflects muted growth expectations as weaker consumer spending has pressured sales.

The key question is whether those low expectations go too far. At roughly 11 times forward earnings, the stock looks cheap for a company with exclusive U.S. distribution rights to some of the country's most popular imported beers. At this price, it may look more like a buy than one to avoid.

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Why the stock is down -- and what the market might be missing

Constellation imports, markets, and sells several major Mexican beer brands, including Modelo, Corona, Pacifico, and Victoria, and it also owns wine brands like Kim Crawford. But higher gas prices and tighter discretionary budgets have made consumers more cautious, weighing on results over the past year.

In fiscal 2026 (ended in February), organic sales (excluding the impact of acquisitions and divestitures) fell 10% year over year, driven mainly by weakness in the wine segment. Results have begun to stabilize, but overall demand remains soft.

In the most recent quarter, comparable organic sales rose 3% year over year. Beer is the sales engine, representing more than 90% of the company's total sales.

Notably, the softness doesn't appear to be a loss of brand power, as the company's brands still resonate with consumers. Modelo Especial remains the top brand in U.S. beer by dollar sales. Overall, Constellation's beer portfolio was the biggest market-share gainer last quarter. That disconnect between strong brand momentum and a beaten-down stock price is why the shares look more like a buy than a sell today.

The highest dividend yield in the stock's history

Constellation continues to produce strong free cash flow, with trailing 12-month free cash flow of $1.83 billion. It returns about 39% of that to shareholders through dividends. Management raised the dividend by $0.01 earlier this year to $1.03 per share quarterly, pushing the forward yield to an attractive 3.2% -- the highest yield in the company's history.

Sales may be soft right now, but consumers aren't likely to stop buying beer. And the company's exclusive rights to distribute and market brands like Corona and Modelo create a durable competitive moat.

There are real risks, including shifting tariff policy, intense competition, and changing preferences across beer, wine, and spirits. Even so, at around 11 times expected earnings and 12 times free cash flow, much of the bad news already appears priced in.

Of course, a prolonged slump could still push the stock lower. But investors are being paid a relatively high dividend yield while they wait for demand to improve.

Over the long run, I don't think people are giving up beer. At this valuation, Constellation Brands looks undervalued in my view -- and positioned to rebound sooner or later.

John Ballard has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.