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Constellation Brands (NYSE:STZ) just had its roughest day in over a decade, with the stock plummeting 16%. The company's fiscal Q3 earnings report didn't hold up to Wall Street's expectations, with net sales of $2.46 billion falling short of the $2.53 billion forecast. Adjusted earnings per share came in at $3.25, missing the $3.31 analysts had hoped for. The management slashed the fiscal-year EPS guidance, blaming subdued spending and value-driven behavior among consumersa trend that started in Q2 and hasn't let up?.
Despite the pain, Constellation's beer segment stayed resilient, with depletion volumes rising 3.2% in the quarter. Modelo Especial and Pacifico carried the torch, but Corona Extra saw a slight dip. Meanwhile, the wine and spirits division dragged the numbers down, with net sales diving 14%, hit by shrinking shipments and inventory corrections at retailers. Although the company is doubling down on higher-margin premiumization, like the divestiture of SVEDKA, the transition hasn't yet offset the revenue slide?.
Looking ahead, the challenges don't stop there. With Mexican imports making up 86% of its sales, the company is exposed to potential U.S. tariffs, which could mean price hikes of 12% or more. Analysts warn this could test the loyalty of even the most devoted Modelo fans. On the bright side, Constellation is leaning on a strong cash flow projection of $1.6 billion to $1.8 billion for fiscal 2025, giving it some breathing room to navigate these headwinds while continuing its investments in beer capacity and marketing
This article first appeared on GuruFocus.