Morgan Stanley downgrades Modelo importer Constellation Brands as Mexico tariffs loom

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Morgan Stanley downgrades Modelo importer Constellation Brands as Mexico tariffs loom

Looming tariffs on ******** imports could pressure shares of Constellation Brands , according to Morgan Stanley. The bank downgraded the Modelo and Corona beer U.S. importer to equal weight from overweight. Analyst Dara Mohsenian also lowered his price target to $202 from $220, although this revised forecast still represents a 13% upside. Shares of Constellation Brands have tumbled 28% in the past 12 months. Mohsenian wrote that while the stock valuation is already “compressed” — down 20% this year after weaker -than-expected fiscal fourth-quarter guidance — there’s now further risk to both the current quarter and longer term. STZ 1Y mountain STZ 1Y chart “Tariff risk is in addition to broader risk in terms of consumer sentiment/spending among Hispanics post recent elections, who account for about half of STZ’s beer volumes,” the analyst elaborated. “In our tariff base case, we estimate a -15% EPS impact to FY26e EPS from a 25% tariff, net of pricing, elasticity, and FX.” The U.S. earlier this month imposed tariffs on ******** imports, which were quickly put on a 30-day pause. However, President Donald Trump said this week that those levies will take effect. Other long-term trends also present cause for concern, such as lower Gen Z alcohol consumption per capita relative to prior generations, competition from cannabis, greater competition on the high end, Constellation’s maturing brand portfolio and muted beer industry growth overall. “Given the magnitude of recent declines, and numerous and seemingly building long-term pressure points, we are lowering our long-term beer depletion growth assumptions,” Mohsenian wrote. “While we don’t have a crystal ball on forward beer depletions, the magnitude of recent slowdown in U.S. scanner/Numerator data highlights long-term durability to the slowdown vs. historical trends in our minds, even with short-term pressures exaggerating recent weakness.” Shares fell more than 1% following the downgrade. Despite the concerns around the stock, most analysts are bullish on it. LSEG data shows 17 of 25 analysts have a buy or strong buy rating on Constellation Brands. The average analyst price target also signals upside of more than 35%.

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