Post-2Q review, I am still upbeat on Constellation Brands (STZ), particularly its beer business, which remains a secular winner in the US. With a cleaner wine business and a clear path to resuming share repurchases, the 2H setup looks favorable, in my view. At current valuations of ~16x EV/EBITDA, and free cannabis optionality via the Canopy (OTC:CGC) stake, the value proposition looks quite compelling vis a vis similar high-growth peers such as Monster (MNST) and Brown-Forman (BF.B).

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Strong Profitability in 2Q21 Despite the Backdrop

STZ’s 2Q21 sales of $2.3bn came in ahead of the Street, with gross margins of 52.5% also ~90bps above expectations. SG&A leverage and delayed marketing spend drove operating margin upside and a strong operating income beat vs. the Street. No surprises then that STZ’s $2.91 in EPS (ex-Canopy) was also well above consensus’ $2.69, though this includes the additional benefit to EPS from