Donald Trump, the US’s next president, has been chosen over Kamala Kamala Harris.
Many believe that the Republican candidate will raise tariffs for foreign products, which they think will result in higher prices and lower income. Other nations may also retaliate economically.
Robert Moskow, TD Cowen’s analyst, says that three alcoholic beverages stocks, Brown-Forman Constellation Brands and Diageo, will be adversely affected by the potential reshaping of international trade under a Trump presidency.
Brown-Forman Corporation (NYSE: BF.B)
TD Cowen believes that Brown-Forman, which is the owner of a number of renowned whiskey brands such as Jack Daniel’s or Old Forester will underperform following Trump’s election because it expects “a high probability of EU reimposing tariffs on American whisky.”
Why? The region is known to have retaliated against tariff increases in the past.
The European Union reacted by imposing 25% on American whiskey imports when Trump increased tariffs on steel and aluminum during his term in office.
The Biden Administration lowered the tariffs, but it is expected that they will be reinstated and may even go up to 50% by 2025.
Brown-Forman remains attractive to income investors, however. It pays out a written dividend yield close to 2.0%.
Constellation Brands Inc (NYSE: STZ)
Constellation Brands, another company name “most negatively affected” by higher tariffs during Donald Trump’s tenure as President of the United States.
The reason is that the New York-based brewery, which produces its beer exclusively in Mexico, will face increased tariffs under a Republican administration.
Robert Moskow, in a Wednesday research note to clients, said that a Mexican tariff would disrupt its supply chain and negatively affect its margin structure.
About 25% of STZ’s costs of goods are peso denominated. A devaluation in the Mexican currency would help to offset the anticipated weakness of shares for the company which owns brands such as Corona and Kim Crawford.
Diageo plc, (LON DGE),
Diageo is also expected to be affected by higher tariffs, according to TD Cowen.
Although the London-based firm produces Don Julio Tequila in Mexico, it generates about one quarter of all sales in America.
Diageo could pass on a part of the 25% tariff to consumers. The investment firm says that with spirits still being a weak category, a tariff-related increase in price could have hefty elasticity.
Diageo’s stock has already fallen more than 20 percent from its high for the year to date in late February. It pays an attractive dividend yield at the time of writing of 3.41%, which puts it in a better position when it comes to total returns.
The post This alcohol stock could be hit by Trump’s administration will change as new information becomes available
