3 Red Flags for Constellation Brands Stock and 1 Green Flag to Watch

Key Points

• Constellation is grappling with declining alcohol consumption rates in America.

• High tariffs and economic pressures for Hispanic consumers are squeezing its profits.

• But it’s still streamlining its business by divesting its weaker wine and spirit brands.

• 10 stocks we like better than Constellation Brands ›

Constellation Brands (NYSE: STZ), one of the largest producers of beer, wine, and spirits in America, was once a stable blue chip investment. But over the past 12 months, its stock declined nearly 30% as the S&P 500 rose 17%. Let's examine the three red flags which are driving investors away -- as well as one green flag which might bring them back.

The first red flag: Younger Americans are drinking less alcohol

Constellation imports its top brands -- including Corona, Modelo, and Pacifico -- from Mexico. But it generates nearly all of its revenue from the U.S. market.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

According to a Gallup poll from 2024, the percentage of younger Americans who drank alcohol dropped from 72% to 59% over the past two decades. Another NielsenIQ survey from 2024 found that 45% of Gen Z consumers over the age of 21 didn't consume any alcoholic drinks at all.

Image source: Getty Images.

That trend is stoking fears that big alcohol companies like Constellation could suffer the same fate as big tobacco companies like Altria (NYSE: MO), which cut costs, hiked its cigarette prices, and bought back more shares to boost earnings per share (EPS) as its revenue growth stalled out.

Constellation is trying to offset that pressure by selling lighter alcoholic drinks like hard seltzers and non-alcoholic versions of its flagship beers. However, it's too early to tell if sales of those Gen Z-oriented products can offset its slowing sales of traditional beers, wines, and spirits.

The second red flag: Lower discretionary spending among Hispanic consumers

Constellation generates roughly half of its beer sales from Hispanic consumers. During its latest conference call, CEO Bill Newlands warned that some of its Hispanic consumers were reducing their discretionary spending as they dealt with immigration issues and the impact of Trump's tariffs on certain industries.

That pressure is troubling for two reasons. First, its beer segment is growing much faster than its smaller wine and spirits segments. Second, it will become harder to offset its slower sales to Gen Z consumers with its older Hispanic consumers. That's why it expects its organic sales to stay nearly flat in fiscal 2026 (which ends next February).

The third red flag: Trump's tariffs against Mexico are crushing its margins

The Trump administration's high tariffs on overseas aluminum, which were raised from 25% to 50% in June, are affecting Constellation's sales of canned imported beers in America. Its Mexican-brewed beer, which accounts for about 85% of its consolidated sales, also faces a 25% tariff in both aluminum cans and glass bottles.

Constellation can ship more of its beer in glass bottles to offset that pressure, but approximately 39% of its beer shipments from Mexico still come in aluminum cans. That pressure will compress Constellation's margins as its revenue growth slows down. If those tariffs stay in effect, it expects its comparable EPS to decline 6% to 9% for the full year.

At $176 per share, Constellation might seem cheap at 14 times the midpoint of that forecast. But if its earnings continue to decline, it could deserve an even lower valuation.

The one green flag: Its divestments of its weaker wine and spirit brands

Constellation faces lots of near-term headwinds, but it's been shrinking its weaker wine and spirits portfolio with some big divestments over the past six years. It sold and discontinued dozens of cheaper wine brands to invest in the growth of its higher-end brands, and it divested its mid-tier Svedka Vodka brand last December to prioritize the growth of its premium spirits. Those divestments support its broader "premiumization" strategy to attract more affluent customers and generate higher-margin revenues. They also indicate it isn't afraid to sacrifice its near-term revenue growth to simplify and strengthen its business.

But Constellation is still a tough stock to recommend

Constellation's business isn't collapsing, but its stock probably won't bounce back until it overcomes its most pressing issues. So for now, I'd avoid it and stick with more reliable blue chip consumer staples stocks which face fewer existential challenges.

Should you invest $1,000 in Constellation Brands right now?

Before you buy stock in Constellation Brands, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Constellation Brands wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $651,599!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,067,639!*

Now, it’s worth noting Stock Advisor’s total average return is 1,049% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 25, 2025

Leo Sun has positions in Altria Group. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.