How to Play Constellation Brands Stock After a 27% Drop in 6 Months
Constellation Brands, Inc. STZ has seen its shares plunge 26.5% in the past six months, underperforming the industry and Consumer Staples sector's rise of 2.5% and 2.8%, respectively. This sharp pullback reflects a combination of factors weighing on investor sentiment and company performance.
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STZ is also trading below its 50-day and 200-day moving averages, a key technical indicator that points to potential weakness in momentum. This suggests that the stock could face continued pressure unless an improvement in broader market sentiment emerges.
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Investors remain divided on whether Constellation Brands is headed for further downside or nearing a potential rebound.
Constellation Brands' core Beer Business, traditionally its strongest growth engine, has faced decelerating depletion trends, particularly in key brands like Modelo and Corona. This slowdown is largely attributed to macroeconomic challenges affecting Hispanic consumers, the company's primary demographic, who have become more cautious in discretionary spending due to inflation, immigration-related uncertainty and job insecurity in key employment sectors. These conditions have dampened near-term demand for beer, especially in social and restaurant consumption occasions.The company dramatically revised its medium-term beer net sales growth outlook from 7%-9% to a more conservative 2%-4% range for fiscal 2027 and 2028. This cautious stance was attributed to ongoing uncertainty around consumer sentiment, tariff impacts and a weaker beer industry backdrop, which is expected to be flat to down 2% in the near term. While STZ emphasized the strong brand health of its portfolio, this guidance cut raised concerns about underlying demand trends and potential structural shifts in consumer behavior.Rising input costs, particularly from tariffs on aluminum cans, alongside inflation and moderated volume growth, have raised concerns about margin sustainability. Although the company reiterated its 39%-40% beer margin target, investors are wary that the levers to offset these headwinds may not be sufficient in the current environment, especially with weaker top-line growth and higher fixed costs from capacity expansions like Veracruz.
Despite challenges, Constellation Brands' focus on premiumization is driving strong growth, particularly through its high-end Power Brands in Wine and Spirits. The Wine and Spirits business has been transitioning its portfolio toward higher-end brands that align better with consumer-led premiumization trends. Key growth drivers included the company's high-end Power Brands, such as The Prisoner Brand Family, Kim Crawford and Meiomi. The beer segment is also experiencing gains from premiumization, driven by growth in traditional beer and flavored categories, including seltzers, flavored beer, RTD spirits and flavored malt beverages.
STZ is investing in its Power Brands through innovation and capitalizing on priority consumer trends with successful product introductions.Constellation Brands is progressing with its next phase of capacity expansion in Mexico to support growing demand for its high-end beer portfolio and the emerging Alternative Beverage Alcohol segment, including hard seltzers. With 48 million hectoliters of capacity at the end of fiscal 2025, the company plans to invest nearly $2 billion from fiscal 2026 to 2028 to develop its Veracruz brewery and expand existing sites. By fiscal 2028, capacity is expected to reach 55 million hectoliters. These efforts aim to strengthen its beer business, drive distribution gains and fuel innovation while resetting its cost base and refining its portfolio.
Reflecting cautious sentiment around Constellation Brands, the Zacks Consensus Estimate for earnings per share (EPS) has seen downward revisions. In the past 30 days, the consensus mark for fiscal 2026 earnings has moved down 0.9% to $12.74. This suggests a year-over-year decline of 7.6% for fiscal 2026. The revisions highlight lingering concerns about STZ's near-term profitability outlook. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
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The ongoing headwinds and dismal guidance indicate that STZ stock lacks near-term growth potential. While its long-term strategies provide a foundation for recovery, concerns around declining margins, elevated cost and reduced earnings forecasts suggest caution. For now, investors may wait for signs of stabilization in earnings and margin trends before considering a position in STZ. The company currently carries a Zacks Rank #3 (Hold).
Nomad Foods NOMD, which manufactures frozen foods, sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here. NOMD delivered a trailing four-quarter earnings surprise of 3.2%, on average. The Zacks Consensus Estimate for Nomad Foods' current financial-year EPS indicates growth of 7.3% from the year-ago number.BRF S.A. BRFS raises, produces and slaughters poultry and pork for the processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products. It currently carries a Zacks Rank #2 (Buy). BRFS delivered a trailing four-quarter earnings surprise of 5.4%, on average.The Zacks Consensus Estimate for BRF S.A.'s current fiscal-year sales and earnings implies growth of 0.3% and 11.1%, respectively, from the prior-year levels.Oatly GroupAB OTLY, an oatmilk company, provides a range of plant-based dairy products made from oats. It presently has a Zacks Rank of 2. OTLY delivered a trailing four-quarter earnings surprise of 25.1%, on average.The consensus estimate for Oatly Group's current fiscal-year sales and earnings implies growth of 2.7% and 65.8%, respectively, from the year-ago figures.
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Constellation Brands Inc (STZ) : Free Stock Analysis Report
BRF S.A. (BRFS) : Free Stock Analysis Report
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