Investors seem to be bailing on Constellation Brands this morning after President Trump announced a 25% tariff on Mexico.
That’s because the alcoholic beverage company relies on Mexico for a bunch of its beer brands, including Pacifico, Corona, and even Modelo.
Trump’s tariff announcement over the weekend made a Piper Sandler analyst downgrade Constellation Brands stock from “overweight” to “neutral” on Monday.
Shares of the largest beer import company in the US are down more than 5.0% at writing.
Why does it matter for Constellation Brands stock
Piper Sandler analyst Michael Lavery downgraded Constellation Brands this morning primarily because higher tariffs against Mexico could hurt its revenue moving forward.
Lavery expects the new tariffs to lower the company’s per-share earnings (F26E) by up to $3.75 “if these tariffs lasted a full fiscal year.”
He, however, agreed that “potential pricing and volume headwinds make it difficult to estimate.”
The US tariffs could add to the pressure on STZ’s numbers that already fell short of analysts’ estimates in the latest reported quarter.
Even without tariffs on Mexico, Constellation Brands was able to earn $3.25 a share on $2.46 billion in revenue only in its fiscal third quarter.
Analysts, in comparison, were at $3.34 per share and $2.54 billion, respectively.
That said, a healthy 2.23% dividend yield keeps Constellation Brands stock attractive for income investors.
STZ may not choose to raise prices
Piper Sandler expects Constellation Brands to remain patient and not increase prices immediately to pass on the additional cost to its customers.
It will opt for such an initiative only when it has more clarity on how long are these new tariffs expected to remain in place.
“Pricing may provide an offset, but taking pricing is challenging, given the key competitors like TAP and BUD produce in the US where no tariff cost applies,” according to Michael Lavery.
Versus the start of 2025, Constellation Brands stock is now down close to 25%.
Truist also recently turned dovish on STZ
Note that Piper Sandler is not the only among Wall Street firms that have been turning more dovish on Constellation Brands lately.
In January, analysts at Truist also reiterated their “hold” rating on STZ and lowered their price target to reflect the miss the company reported for its fiscal third quarter.
Truist now expects the alcoholic beverage company to earn up to $13.70 a share in the current year and up to $14.86 per share in 2026 – both below its previous estimates.
The investment firm took somewhat of a dovish stance on Constellation Brands stock as it lacks a meaningful catalyst until the peak summer season, which is about 6 months away for now.
Note that Truist’s call on STZ came even before the tariff announcement against Mexico.
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