Constellation Brands' beer business anticipates facing multiple pressures in the fiscal fourth quarter, which has led the company to revise its growth outlook for this segment. This adjustment was highlighted in a recent analysis from RBC Capital Markets. As the company prepares to announce its quarterly results next month, analysts noted that the depletion rate of the beer division, which reflects how quickly products are sold to consumers, is encountering obstacles.
Factors contributing to this slowdown include wildfires in Los Angeles, adverse weather conditions, and uncertainties related to potential tariff impacts. Moreover, heightened immigration controls are significantly impacting Hispanic consumers, a demographic that contributes 36% of the beer and wine company's sales—this is notably the highest proportion among those tracked by RBC.
Nik Modi, leading the analysis at RBC, remarked on the critical role this consumer group plays in the market. In addition to these challenges, Constellation's beer category is grappling with structural issues. Analysts have pointed to the rising popularity of weight-loss medications and a growing focus on health and wellness among consumers, trends that may contribute to a decline in demand for traditional alcoholic beverages.
This situation could compel Constellation Brands to adjust its long-term revenue growth projections for the beer sector downward, forecasting increases between 4% and 6%, contrasting previous estimates of 7% to 9%. Despite a history of meeting long-term growth expectations for its beer business, the company’s stock performance has not received the recognition it deserves, according to RBC.
They suggested that resetting expectations could prove beneficial, as investor skepticism remains apparent. Earlier this year, Constellation Brands had already scaled back its revenue growth target for the beer segment to between 4% and 7% for fiscal year 2025, attributing this decision to weak consumer demand and broader economic challenges. As for upcoming reports, Constellation is set to unveil its fourth-quarter results on April 9.
RBC anticipates that the 25% tariff implementation on imports from Mexico, proposed during the Trump administration, could further complicate the company’s earnings for fiscal year 2026. On a consolidated level, the analysts project that sales for Constellation's beer and wine segments will expand by 3% to 6% during that year. However, it appears unlikely that Constellation Brands will resort to significant price hikes to mitigate the risk associated with tariffs, as the company seems committed to safeguarding its volumes and market share.
Modi suggested that the company would absorb a substantial portion—approximately 50%—of the tariff impact, balancing the remainder through productivity improvements, revenue growth strategies, and adjustments related to a fluctuating peso. In light of these developments, RBC has revised its price target for the stock, now rated outperform, down to $289 from $293.
Current market price stands at 184.88, reflecting an increase of 5.93, or 3.31%..