BofA Downgrades Constellation Brands to Underperform Amid Long-Term Alcohol Consumption Concerns

Bank of America downgraded Constellation Brands to Underperform from Neutral, citing long-term concerns over alcohol consumption. Analyst Peter Galbo attributed the bearish view to the company's reliance on beer, a category with declining sales. The downgrade led to a decline in Constellation Brands' stock price in early trading on Tuesday.

Constellation Brands (STZ) faced a significant setback in early trading on Tuesday after Bank of America (BofA) downgraded the company to "Underperform" from "Neutral." The downgrade, attributed to long-term concerns over declining alcohol consumption, particularly in the beer category, led to a near 1% decline in the stock's price.

Peter Galbo, an analyst at BofA, expressed concerns about the company's reliance on beer, a segment that has been experiencing declining sales. The downgrade reflects BofA's view that further downside potential exists for Constellation Brands' shares, citing risks to sales, margins, and valuation. The bank has also reduced its price target for the company to $150 from $182 [1].

The downgrade comes amid a broader trend of weak consumer demand for alcoholic beverages. Constellation Brands, which sells a variety of beers including Modelo Especial in the U.S., has been under pressure from declining beer consumption and pressure on its Hispanic consumer base. The company has seen a 25% decline in its stock price since the start of the year, largely due to tariffs, increased immigration enforcement, and long-term trends in the alcohol industry [2].

BofA's downgrade is the latest in a series of negative developments for Constellation Brands. Earlier this year, Citi lowered its price target for the company and placed it on its "negative 30-day catalyst watch," citing concerns that the company would lower its guidance at its investor conference in September [3]. The company's stock has underperformed the broader market and the consumer staples sector over the past year, with a 33.2% decline in the past 52 weeks and a 25.9% drop year-to-date (YTD) [4].

Despite the challenges, Constellation Brands remains committed to growth. The company expects its earnings per share (EPS) to decline by 8.5% in fiscal 2026 but grow by 8.6% in fiscal 2027 [4]. However, the downgrade from BofA underscores the ongoing challenges the company faces in the alcohol industry.

References:
[1] https://sherwood.news/markets/constellation-brands-slips-after-getting-its-only-sell-rating-from-bank-of-america/
[2] https://ca.finance.yahoo.com/news/bofa-cuts-constellation-brands-underperform-145408265.html
[3] https://seekingalpha.com/news/4489117-bofa-turns-bearish-on-constellation-brands-amid-long-term-alcohol-consumption-concerns
[4] https://www.barchart.com/story/news/34396518/are-wall-street-analysts-predicting-constellation-brands-stock-will-climb-or-sink