Constellation Brands Faces Challenges Amid Shifting Market Trends

Constellation Brands struggles under pressure from generational shifts in alcohol consumption and tariff impacts. Analysts focus on EPS declines due to tariffs as the company implements strategic changes to regain market foothold.

Date: 02-05-2025

AI Rating: 4

Market Performance Overview
Constellation Brands has experienced a challenging year, with its stock down nearly 30%. This decline is attributed to changing consumer behaviors, particularly among younger demographics, who are consuming less alcohol.

The company is navigating severe headwinds including:

Earnings Per Share (EPS): Analysts project that tariffs imposed by the Trump administration could adversely impact the company's EPS by $3 to $3.75 in fiscal 2026, representing a potential decline of 22% to 27% in relation to its EPS of $13.78 in fiscal 2025. This could result in an EPS drop of 8% to 11% in fiscal 2026.
Revenue Growth: Constellation is forecasting organic sales for fiscal 2026 to remain flat, affected by double-digit declines in its wine and spirits segments, despite a projected 0% to 3% growth in beer sales.
Net Income and Profit Margins: The anticipated reduction in EPS due to ongoing tariffs may further compress profit margins, especially as the company transitions from lower-margin brands to premium offerings. Constellation is undertaking restructuring efforts intended to achieve roughly $200 million in annual savings through fiscal 2028.

Looking ahead, Constellation's plans to divest weaker brands and invest in growth areas provide potential for recovery. The stock appears undervalued at 14 times forward earnings with a forward yield of 2.2%. Analysts expect growth in EPS by mid-single to low double digits in fiscal 2027, matching overall market growth expectations.

Investment Outlook
Future upside potential for Constellation is contingent on external factors such as tariff negotiations. If tariffs are reduced, there could be a substantial rebound in stock valuation and performance. Current projections suggest a modest stock rise of 4% to approximately $193 per share within the next year, indicating potential stabilization. However, investor sentiment will depend heavily on political and economic developments regarding tariffs.

Stocks: STZ