Constellation Brands (NYSE:STZ) is the beverage giant behind Modelo, Corona, and Kim Crawford. The stock has declined significantly in the past few months due to lingering weakness in the company’s financials.
The selloff has accelerated even more this year. However, there’s a chance Wall Street is going overboard. Here’s what you need to know:
The stock plunged after Q3 FY2025 results came out. Constellation Brands posted revenue of $2.46 billion, which is flat year-over-year. EPS of $3.25 also missed consensus by $0.08 and beer sales grew just 3% to $2.03. That said, even that gain was offset by wine/spirits slumping 14%.
In addition, FY2025 EPS guidance was reduced to $13.4 to $13.8 from $13.6 to $13.8. Net sales growth was trimmed to 2-5%, from 4-6%.
The stock went down further after Trump’s 25% tariffs on Canada and Mexico. The Mexican tariffs have been paused for one month, and it’s likely that the same could happen with Canada, but there’s still long-term uncertainty here.
Plus, Constellation Brands has $12.1 billion in debt and just $74 million in cash.
The consensus price target of $241.8 implies 37% upside for STZ stock. Price targets have varied from $190 to $300 in the past three months.
However, it is worth keeping in mind that even the lowest price target implies some decent upside from here. The company is still generating lots of cash. It projects $1.6 billion to $1.8 billion in free cash flow for FY2025. This was raised from an earlier projection of $1.4 billion to $1.5 billion. As of the last quarterly report, it returned $1.2 billion to shareholders.
Constellation Brands is expected to grow its EPS by almost 13% this year and 7.6% next year, and with the tariffs on Mexico being paused, there is a good chance the selloff is overdone. Buying the dip seems to be a good idea here. If the market keeps reacting negatively to tariffs, Trump will likely cut deals, as he has just done with Mexico.