Constellation Brands is being bailed out by investors this morning, after Trump’s announcement of a 25% tariff against Mexico.
This is because a number of the beer brands that Pacifico, Corona and Modelo are sourced from Mexico.
Piper Sandler’s analyst, who had been “overweighting” Constellation Brands shares over the weekend, downgraded them to “neutrality” Monday.
At the time of writing, shares in the US’s largest beer company were down by more than 5.0%.
What is the significance of Constellation Brands Stock?
Piper Sandler analyst Michael Lavery has downgraded Constellation Brands today, primarily due to higher tariffs on Mexico that could harm its revenues moving forward.
Lavery estimates that the new tariffs will lower its earnings per share (F26E), “if they lasted for a full year”.
The CEO acknowledged that it was difficult to predict the impact of “potential price and volume headwinds.”
STZ could be under pressure from US tariffs, which already caused STZ to fall short of analyst estimates for the last reported quarter.
Constellation Brands, despite not having tariffs in Mexico, was still able to make $3.25 per share from $2.46billion in revenues in the third fiscal quarter.
Comparatively, analysts were at $3.34 a share and $2.54bn, respectively.
Constellation Brands is attractive to income investors because of its healthy dividend yield.
STZ can choose not to increase prices
Piper Sandler is expecting Constellation Brands not to increase its prices right away and to be patient.
The government will only take such a step if it is clear how long these new tariffs are expected to be in effect.
Michael Lavery says that pricing may be an option, but it is difficult to take prices into consideration, since key competitors such as TAP and BUD are produced in the US, where there are no tariff costs.
Constellation Brands’ stock price is down by almost 25% compared to the beginning of 2025.
Truist has recently dovished on STZ
Piper Sandler has not been the only Wall Street firm to become more bearish about Constellation Brands in recent months.
Analysts at Truist reiterated in January their “hold rating” on STZ, and also lowered their target price to reflect the missed earnings the company had reported for the third fiscal quarter.
Truist expects that the company will earn between $13.70 and $14.86 a share this year, both lower than its original estimates.
Constellation Brands’ stock is viewed as a bit dovish by the investment firm, since it does not have a significant catalyst before summer peak season which will be in about six months.
Truist made his STZ call even before Mexico announced tariffs.
The post Trump’s Tariffs Behind Constellation Brands Stock Drop on Monday? This post originally appeared at ICD
