Constellation Brands: Compelling Growth May Just Offset Tariff Risk
Earnings keep spilling lower while the company fights changing consumer behaviors.
Warren Buffett, the legendary "Oracle of Omaha," has made a splash in the alcoholic beverage market. His investment firm, Berkshire Hathaway NYSE: BRK.A, recently acquired a substantial $1.24 billion stake in Constellation Brands NYSE: STZ, the company behind popular brands like Corona and Modelo beer.
Berkshire Hathaway took a stake in the beverage company and doubles its holding in the pizza chain.
Constellation Brands' strong portfolio of alcoholic beverages has driven consistent revenue growth. Further, the company's profitability has remained strong over the past decade, highlighting the strength of the business. Following a recent downturn, Constellation Brands stock now trades at a very cheap forward P/E compared to its long-term average, leaving investors with ample upside potential. Tariffs are a risk, but they're often used as a negotiation tactic. Thus, I believe they're more likely to be a short-term headwind rather than a long-term one.
STZ faces near-term pressures from weak earnings and rising costs, but its long-term premiumization strategy offers a path for recovery.
Constellation Brands Inc (NYSE:STZ) stock is down 1.9% to trade at $177.47 at last glance, after President Donald Trump imposed a 25% tariff on goods from Mexico.
Among the companies feeling the impact of President Donald Trump's tariffs announced over the weekend is alcoholic beverage giant Constellation Brands (STZ).
Piper Sandler downgrades shares of the Mexican lager distributor to Neutral from Overweight.
Investors seem to be bailing on Constellation Brands this morning after President Trump announced a 25% tariff on Mexico. That's because the alcoholic beverage company relies on Mexico for a bunch of its beer brands, including Pacifico, Corona, and even Modelo.
NEW YORK, NY / ACCESSWIRE / January 14, 2025 / Levi & Korsinsky notifies investors that it has commenced an investigation of Constellation Brands, Inc. ("Constellation Brands, Inc.") (NYSE:STZ) concerning possible violations of federal securities laws. On January 10, 2025, Constellation issued a press release announcing the company's third quarter fiscal year 2025 results, showcasing a significant miss on sales performance in the Beer segment and an even steeper miss for the Wine & Spirits segment.
I downgraded Constellation Brands (STZ) from buy to hold due to visible headwinds, including macroeconomic uncertainty, health concerns, and intensifying competition. STZ's 3Q25 results were mixed, with beer segment growth slowing and Wine & Spirits segment continuing to underperform, dragging overall performance. Until STZ shows clearer progress in addressing these challenges, I recommend a hold rating due to the significant risks to growth and margins.