Fundamentals Still Challenged, But More Than Priced In; Stay Buy

STZ is scheduled to report F2Q EPS on Tuesday (10/6) after the close. We have adjusted our underlying assumptions for both 2Q and FY27 to reflect a softer consumer backdrop into late Summer, with our 2Q EPS estimate of $3.33 now sitting below Visible Alpha consensus of $3.54 heading into the print. Overall, our conversations with investors would suggest that while sentiment has become more mixed in recent weeks, it still leans negative given the challenged demand backdrop. We believe the base case expectation is that STZ will reiterate FY27 guidance across the board; the company is currently forecasting EPS of $11.20-$11.90 vs. our $11.50 forecast and Visible Alpha consensus of $11.80. We now forecast beer depletions to be down -1% (vs. +0.5% previously; Street +1.1%) with total beer sales -0.5%. We rate STZ Buy; our price target moves to $145 (down from $168), based on a balanced blend of P/E and EV/EBITDA, and moves lower on peer multiple contraction.