Constellation Brands (STZ) Stock Forecast & Price Target

Constellation Brands maintains a positive outlook due to continued market share gains in the beer segment, with projected operating margins stabilizing at the midpoint of 39-40% for FY25. The potential for revenue and earnings upside exists if the beer category reaccelerates and there is an absence of tariffs on Mexican imports, which could lead to significant multiple expansion. Moreover, the company's strategic portfolio pruning in wine and spirits, coupled with innovation-driven pricing, is expected to enhance profitability and provide incremental margin growth.

Constellation Brands's stock outlook is negatively influenced by a significant slowdown in beer volumes, which have decreased by 2.5% on a two-year average basis in March, indicating a 190-basis point deceleration from the previous quarter. The company is facing challenges in its wine and spirits category, with expectations of continued difficulties this year, coupled with competitive pressure from the growing seltzer market. Additionally, potential tariff increases of 25% or more, along with the socioeconomic impact of mass deportations leading to reduced beer consumption, pose substantial risks to the company's revenue and earnings prospects.