On Tuesday, Bernstein SocGen Group revised its outlook on Constellation Brands (NYSE:STZ), reducing the stock's price target from $315.00 to $300.00, while maintaining an Outperform rating. The stock, currently trading at $185.91, has experienced significant pressure, falling nearly 15% in the past week and 28% over the last six months.
According to InvestingPro data, the stock's RSI suggests oversold conditions, with shares trading near their 52-week low of $176.51. The adjustment comes amid concerns about the future growth of the company's beer segment, which Bernstein believes are overstated.
Despite a modest 3.2% growth in Q3 depletion, the analyst, Nadine Sarwat, suggests that investor anxieties regarding overall U.S. alcohol consumption and potential long-term challenges from moderation trends, cannabis legalization, and GLP-1 treatments may be contributing to a cautious view of the stock.
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Sarwat outlined two possible scenarios regarding tariffs on Mexican imports, which could significantly impact Constellation Brands. The first scenario posits that the threat of tariffs might merely serve as a bargaining chip and may not actually be enforced, which would make Constellation Brands a very attractive investment at its current price. The second scenario considers the implementation of a 25% tariff, which could reduce the company's earnings per share (EPS) by low 20 percentages. Sarwat believes this risk is already reflected in the stock's price.
The report also notes that the uncertainty surrounding tariffs could lead to the stock trading sideways until more clarity is achieved. In light of the latest earnings and scanner data, Bernstein has reduced its earnings estimates and target multiple from 18.5x to 18.0x to account for the increased uncertainty.
In conclusion, while Bernstein SocGen Group remains optimistic about Constellation Brands' performance, it expresses caution due to the potential tariff risks, leading to a lowered price target for the company's shares. Despite current challenges, the company maintains a strong dividend profile with 10 consecutive years of dividend increases and a current yield of 2.17%.
For comprehensive analysis including Fair Value estimates and detailed financial metrics, investors can access the full research report on InvestingPro.
In other recent news, Constellation Brands faced a series of adjustments from various analyst firms. RBC Capital Markets lowered its price target for the beverage company to $293, maintaining an Outperform rating despite a challenging quarter.
Similarly, Truist Securities reduced its stock target by 25% to $190, holding onto its Hold rating due to a more conservative outlook for the company's future financial performance. Bernstein SocGen Group, on the other hand, sustained an Outperform rating for Constellation Brands despite setbacks in the company's beer segment, reporting a 3.2% growth in Q3 F25 depletions and beer net sales of $2,032 million.
TD Cowen maintained a Hold rating on the company's stock following third-quarter results that fell short of expectations despite increased marketing efforts. The firm revised their price target for Constellation Brands, citing factors such as a prolonged trend of value-seeking behavior among consumers and intensified price competition in the light beer segment.
Analysts at Jefferies downgraded the company's stock from 'Buy' to 'Hold', significantly reducing the price target, influenced by the company's miss across all segments and a downward revision of its guidance.
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