Street Calls of the Week
Investing.com -- Bank of America downgraded Constellation Brands to Underperform from Neutral and cut its price target to $150 from $182, saying beer consumption remains soft and the stock is still not cheap despite a 26% fall this year.
The bank said weaker demand is creating risks to sales, profit margins and valuation, particularly as Constellation expands capacity in Mexico.
It also flagged pressure on the company’s core Hispanic consumer base and longer-term declines in alcohol consumption.
BofA now values Constellation at 11.5 times its 2026 earnings forecast, compared with its prior 13 times, and sees earnings at $12.60 in fiscal 2026, the low end of the company’s outlook. It expects earnings of $13.50 in 2027 and $13.90 in 2028.
Near-term trends are also soft. The firm cut its beer depletion forecasts to a 2.5% drop in the second quarter of fiscal 2026 and a 1.8% decline for the full year, citing slowing consumption and tougher comparisons. That could add pressure to Constellation’s industry-leading margins, which are heavily reliant on volume growth, it said.
BofA added that while strong cash flow and share buybacks could support earnings, shifting from a growth story to one focused on capital returns carries risks.
“Our Underperform rating reflects our view that we see further potential downside to shares of STZ as beer industry consumption remains soft creating risk to sales, margin and multiple,” analyst at BofA said.