What Happened?
Shares of beer, wine, and spirits company Constellation Brands (NYSE: STZ) fell 7.4% in the morning session after the company lowered its financial outlook for fiscal year 2026, citing a challenging macroeconomic environment and weakening consumer demand. The owner of popular brands like Corona and Modelo now projects comparable earnings per share of $11.30 to $11.60, a significant reduction from the prior forecast of $12.60 to $12.90. The company also expects a 4% to 6% decline in organic net sales. Management attributed the revision to a sudden drop in beer sales, noting that purchasing declines among Hispanic consumers—a key demographic—were particularly pronounced. This trend, combined with lower volumes and the impact of tariffs, prompted the more cautious outlook.
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What Is The Market Telling Us
Constellation Brands’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock dropped 3% on the news that a downgrade from Bank of America Securities, which lowered its rating on the stock to Underperform from Neutral and slashed its price target. BofA analyst Peter Galbo cut the price target to $150 from $182, citing significant risks to the company's sales and margins.
The downgrade reflects concerns over soft consumption in the beer industry, ongoing pressure on the company's core Hispanic demographic, and challenging longer-term alcohol consumption trends. Galbo noted that despite the stock's 26% year-to-date decline, further downside is possible.
Adding to the negative sentiment, RBC Capital also trimmed its price target on the stock to $230 from $233, although it maintained an Outperform rating. The slew of negative analyst actions comes as the stock trades at a 52-week low.
Constellation Brands is down 32% since the beginning of the year, and at $151.32 per share, it is trading 41.4% below its 52-week high of $258.40 from September 2024. Investors who bought $1,000 worth of Constellation Brands’s shares 5 years ago would now be looking at an investment worth $804.83.
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