Constellation Brands (STZ) delivered a better-than-expected third quarter, and at least one Wall Street analyst thinks this could be the beginning of something good for the beverage giant.

The company beat estimates across the board, with revenue, operating income, and earnings per share all coming in above what analysts had penciled in. Shares rallied nearly 4% to $146.02 on Thursday, a welcome bounce for a stock that's been beaten down 33% over the past year.

Why This Quarter Matters

Needham analyst Gerald Pascarelli, who maintains a Buy rating and $180 price target on Constellation, sees this quarter as a launching pad for 2026. The setup looks promising: scanner volumes improved in December, and the company is about to cycle some easier comparisons after dealing with headwinds like the Trump inauguration and California wildfires.

"We view the quarter as a solid start to the calendar year ahead of a better setup looking out over the next 12 months," Pascarelli said.

Both beer and wine segments beat operating income expectations, with beer depletions outperforming scanner data heading into the report. The company also reaffirmed its full-year guidance, which suggests management feels confident about the path forward.

The Bigger Picture

Here's what makes this interesting: Constellation has been gaining market share even while the broader category struggles. Brand health metrics remain best in class, according to Pascarelli, yet the stock trades at what he calls a "discounted valuation."

"Based on such a discounted valuation, we believe much of this 'moment in time' bad news is already embedded in the shares," the analyst noted.

Translation: if the headwinds continue fading and those easier comparisons materialize, there could be upside from here. The stock is trading in a 52-week range of $126.45 to $207.90, so there's plenty of room to run if the turnaround thesis plays out.