To The Moon

$Constellation(STZ)$ $Coca-Cola(KO)$ $Pepsi(PEP)$ The opening salvo of Q3 earnings season arrives tonight, and it’s more strategically significant than the headlines suggest. Constellation Brands ($STZ) isn’t just another Consumer Staples name reporting after the bell; it’s a bellwether for U.S. pricing power, margin durability, and investor appetite for Staples as macro leadership rotates. With options implying a ±6.89% post-earnings swing, this release has the potential to either stabilise sector sentiment or reinforce the narrative of sluggish top-line growth that has shadowed Staples for the past 12–18 months.

🍺 Earnings Setup

STZ reports Q2 FY26 results post-market on 06Oct25. Consensus expects $3.40 EPS on $2.5 B revenue, compared with $3.22 EPS and $2.52 B revenue in Q1. UBS sits below the street at $3.30 EPS and has trimmed its price target from $205 to $175 (still +24.5% upside from $140.51), citing muted volume trends and profit headwinds.

Beer remains the growth engine, with Modelo Especial and Corona continuing to gain U.S. market share. The focus is on whether pricing strength can offset slower volumes. In Wine & Spirits, the shift toward premiumisation remains central to margin support amid packaging and logistics cost inflation. Capital allocation also matters: deleveraging progress and share buybacks could shape the guidance narrative. FY26 EPS and free cash flow outlook are likely to drive the post-earnings reaction more than the headline print.

🏦 Balance Sheet & Enterprise Value Lens

$STZ carries significant debt on its balance sheet, following a series of large acquisitions in the premium alcohol and cannabis markets (including Modelo, Corona, Pacifico, and its Canopy Growth investment), many of which were funded through borrowing.

Lower interest rates would reduce the cost of servicing this debt and make new borrowing cheaper, freeing up capital for capex, marketing, or shareholder returns through dividends and buybacks.

Current net debt represents ~32.7% of total Enterprise Value ($35.2bn) and 2.9× FY25 EBITDA ($3.9bn), which is material. Below is the breakdown of STZ’s Enterprise Value structure, showing $23.4bn in equity, $11.5bn in net debt, and $0.3bn in minority interest. This leverage profile makes $STZ particularly sensitive to macro rate expectations and capital allocation shifts.

🧭 Positioning Context

STZ trades near $140 with an RS Rating of 7 after a sustained drawdown. On the 4H Keltner and Bollinger overlays, price is testing short-term EMAs after a sharp bounce off late-September lows. Sector timing matters: Consumer Staples’ earnings weight accelerates from late October through November, making this report a tactical lead indicator for investor positioning in the weeks ahead.

📊 Options Lens

Options positioning has started to build meaningfully into the print. Notably, there’s been a cluster of long-dated call sweeps targeting 06/18/26 $150C ($488.6K and $556.4K blocks), suggesting institutional accumulation beyond the immediate quarter.

Near-dated flows show activity concentrated around $137–$160 calls, alongside selective $125–$135 puts, consistent with classic pre-earnings straddle/strangle structures. Implied volatility is running in the mid-30s to mid-40s, aligning with the ±6.89% expected move, indicating directional bets without extreme skew.

This mix of tactical short-dated and strategic long-dated flows implies that while traders are positioning for a volatile print, there’s also longer-horizon bullish interest in a potential recovery trajectory.

🧭 Institutional Positioning: Berkshire Hathaway

Berkshire Hathaway holds 12.01 million shares of $STZ with an average price near $204.77, placing the position currently deep in the red at present levels (~$140). This stake adds a significant layer of institutional signalling: Berkshire is known for its long-term strategic positions rather than short-term trades.

Technically, the chart shows $STZ breaking well below Berkshire’s cost basis, currently trending near multi-year descending resistance. The market’s reaction post-earnings will be closely watched to see whether this zone evolves into a longer accumulation phase or continues to reflect fundamental headwinds.

🧠 Analyst Lens

UBS maintains its Buy rating but expects investors to adopt a wait-and-see stance near term. The firm argues downside risk is largely embedded, and easier comps into CY26 could pave the way for top-line improvement. Risks include anemic volume growth and persistent profit headwinds even if comps ease.

📈 Watchlist into the Print

• EPS and revenue vs consensus ($3.40 / $2.5 B)

• Beer segment volume trends and pricing elasticity

• FY26 EPS and FCF guidance adjustments

• Inventory commentary heading into the holiday season

• Reaction of Consumer Staples ETF (XLP) post-print as a sentiment gauge

👉❓Will tonight’s STZ earnings be the quiet Staples catalyst that steadies the broader market narrative, or will it reinforce structural growth concerns heading into peak reporting weeks?

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