Constellation Brands at a Crossroads: Can the Beverage Giant Recover Its Momentum?

The Three-Year Challenge Ahead

Constellation Brands (NYSE: STZ) faces a critical juncture. Analysts project the company will navigate a contraction phase in fiscal 2026, with total revenue expected to decline 4%-6% on an organic basis. However, the outlook suggests stabilization in fiscal 2027, followed by modest growth of approximately 3% in fiscal 2028. This recovery hinges on the company’s ability to rebalance its portfolio and adapt to shifting consumer preferences.

The stock currently trades at an attractive valuation of just 12 times forward adjusted earnings, with a forward dividend yield of 2.9%. Yet investors should temper their expectations—this discount reflects genuine operational headwinds rather than hidden value.

Understanding the Business Deterioration

As one of the world’s largest alcoholic beverage producers, Constellation generated fiscal 2025 revenues across three segments: beer (84%), wine (14%), and spirits (4%). The company produces iconic brands including Modelo, Corona, Pacifico, Kim Crawford, Ruffino 1887, Casa Noble Tequila, and Svedka Vodka.

The revenue trajectory tells a sobering story:

Source: Constellation Brands Financial Data

This deceleration reflects multiple pressures converging simultaneously. The beer business, which anchors the company’s financial performance, has faced particular stress as younger American consumers demonstrate lower alcohol consumption rates compared to prior generations. Meanwhile, the company’s core demographic—Hispanic consumers who represent approximately half of beer sales—has tightened spending amid immigration-related uncertainties and broader economic pressures.

The Perfect Storm of Operational Headwinds

Three distinct forces have compressed margins and slowed growth. First, tariffs on aluminum cans—accounting for nearly 40% of beer shipments from Mexico—have increased input costs substantially. Second, supply chain complications stemming from Mexico’s 2020 cancellation of a planned brewery continue to ripple through production. Third, inflation has forced price increases that, counterintuitively, have dampened demand rather than maintained volumes.

To navigate these pressures, Constellation has pursued a deliberate portfolio restructuring: divesting lower-tier wine and spirit brands to concentrate on premium positioning. While strategically sound, this right-sizing exercise has mechanically reduced revenues in two segments, thereby amplifying the relative importance of the struggling beer business.

Profitability in Flux

The company’s earnings trajectory has proven volatile. Following GAAP net losses in fiscal 2022 and 2023—partially attributable to impairments on its Canopy Growth cannabis investment—Constellation returned to profitability in fiscal 2024. Fiscal 2025 again recorded a net loss, driven by substantial impairment charges related to ongoing divestitures.

Looking ahead, analysts anticipate GAAP profitability in fiscal 2026, with earnings per share growing 18% in fiscal 2027 before moderating to 4% in fiscal 2028. On a non-GAAP basis, EPS is expected to decline 4% in fiscal 2026, recover with 8% growth in fiscal 2027, and then contract 2% in fiscal 2028.

The Valuation Paradox

Constellation’s discount valuation presents both opportunity and caution. At 12 times forward earnings with a 2.9% dividend yield, the stock appears inexpensive relative to historical norms. Yet this valuation reflects genuine business challenges rather than temporary mispricing.

The company’s path to re-rating depends entirely on execution: successfully repositioning its beer portfolio, completing its wine and spirits restructuring, and weathering Trump Administration tariff policies without further demand destruction. Until management demonstrates these capabilities, the market seems justified in applying a cautious multiple to the stock.

Investment Outlook: Sideways Drift

For the next three years, Constellation Brands stock will likely remain range-bound. The company offers downside protection through its low valuation and steady dividend, but lacks the catalysts necessary for significant appreciation. Investors seeking exposure to premium alcoholic beverages or disciplined portfolio restructuring may find the risk-reward attractive. However, those hunting for accelerating growth should look elsewhere.

The real test arrives in fiscal 2027 and 2028—if revenue growth stabilizes and profitability expands as projected, Constellation could justify a rerating. Until then, expect patience to be rewarded modestly, not spectacularly.