Where Will Constellation Brands Stock Be in 5 Years?

Constellation Brands' stock has underperformed the S&P 500 over the past five years, despite revenue growth driven by its beer business (Modelo, Corona, Pacifico) offsetting declines in wine and spirits. While analysts project a return to GAAP profitability in fiscal 2026 and EPS growth, near-term challenges include potential tariffs on Mexican imports impacting beer sales and ongoing restructuring of its wine and spirits portfolio; management anticipates organic sales to remain nearly flat in fiscal 2026.

Analysis

Constellation Brands (STZ) has demonstrated significant stock underperformance over the past five years, declining 8% while the S&P 500 advanced 86%, largely due to strategic repositioning and operational challenges. The company's revenue structure has increasingly relied on its beer division, which constituted 83.7% of total revenue in fiscal 2025, a substantial increase from 67.3% in fiscal 2020, buoyed by strong brands like Modelo and Corona. This concentration resulted from the divestiture of numerous lower-margin wine and spirits brands, leading to revenue contractions in those segments; for instance, wine revenue fell 7% and spirits revenue by 11% in fiscal 2025. Although total revenue achieved a compound annual growth rate (CAGR) of 4% between fiscal 2020 and 2025, this growth was exclusively driven by the beer business. However, beer revenue growth itself decelerated from 11% in fiscal 2022 and 2023 to 5% in fiscal 2025, attributed to supply and capacity constraints in Mexico, price increases, and a broader weakening of the U.S. beer market, especially among younger demographics. GAAP profitability has been inconsistent, with net losses recorded in fiscal 2022 and 2023, partly due to the impairment of its Canopy Growth investment, and another loss in fiscal 2025 linked to impairment charges from wine and spirits divestitures. Conversely, non-GAAP comparable EPS grew at a 9% CAGR during the fiscal 2020-2025 period. Significant near-term headwinds persist, with management projecting nearly flat organic sales (ranging from a 2% decline to a 1% increase) for fiscal 2026. More critically, non-GAAP EPS is expected to decrease by 8% to 11% if the current 25% tariffs on Mexican canned beer imports, impacting approximately 39% of its beer shipments, are maintained. Analysts forecast a revenue dip from $10.2 billion in fiscal 2025 to $9.9 billion by fiscal 2028 due to ongoing brand divestments, yet they anticipate a return to GAAP profitability in fiscal 2026 and a subsequent 7% EPS CAGR. This could translate to a 45% stock appreciation over the next five years, assuming these estimates materialize and the stock trades at a 14 times forward earnings multiple.

Key Decisions for Investors

• Investors should closely monitor developments regarding tariffs on Mexican imports, as their continuation could significantly depress Constellation's beer segment profitability and non-GAAP EPS by 8-11% in fiscal 2026, according to company guidance.
• The success of the ongoing wine and spirits portfolio restructuring, particularly the shift towards premium brands, warrants careful observation as it is crucial for offsetting potential beer segment weakness and improving overall margin profiles.
• Given the flat organic sales forecast for fiscal 2026, potential near-term earnings contraction, historical stock underperformance, and reliance on navigating tariff headwinds, a cautious stance is advisable until there is greater visibility on sustained beer volume growth and the impact of strategic shifts.