Constellation Brands Faces Challenges Amid Escalating US-Mexico Trade Tensions

Constellation Brands (STZ) stock declines amid escalating U.S.-Mexico trade tensions, which may erode margins due to rising costs. Analysts forecast a potential upside of nearly 28% from current levels, with price targets ranging from $170 to $300. GuruFocus estimates a 54.79% upside based on the GF Value metric.

Constellation Brands (NYSE:STZ), a leading manufacturer and marketer of beer, wine, and spirits, has seen its stock decline amid escalating U.S.-Mexico trade tensions. The company's stock has fallen by approximately 21.19% year-to-date, driven by concerns over potential tariffs on Mexican imports. The latest threat from Mexico, which could include tariffs on agricultural products and increased customs complexities, has added to the uncertainty surrounding Constellation Brands' operations.

Mexico's President Claudia Sheinbaum has threatened retaliatory actions if a deal isn't reached by August 1, stating that Mexico will take unspecified actions if the U.S. fails to reach an agreement. This comes in response to Washington's threat to impose a 30% tariff on non-USMCA-compliant imports from Mexico, aimed at curbing Mexican drug cartels' fentanyl trade.

Constellation Brands' reliance on Mexican production for popular brands like Modelo, Corona, and Pacifico makes it particularly vulnerable to these trade tensions. Beer sales represent as much as 90% of the company's total revenue. Additionally, the company is exposed to U.S. tariffs on imported steel and aluminum used for its beer cans.

Analysts have expressed varied opinions on the potential impact of these tariffs. Evercore ISI has maintained an Outperform rating with a $210.00 price target, despite growing concerns over potential tariffs. The firm calculates that a worst-case scenario could impact earnings by approximately $4.50 per share. However, other analysts, such as Jefferies, have boosted their price target for Constellation Brands to $205, upgrading the company from Hold to Buy. Jefferies anticipates that revenue and profit growth will pick up speed in the second half of the fiscal year, driven by stabilizing consumer sentiment and improving margins.

Despite the recent stock decline, Constellation Brands' management expects near-term growth, particularly in its beer segment. The company's robust free cash flow and increasing profitability in its wine and spirits unit support ongoing share buybacks. However, the company's valuation appears too low, according to some analysts, offering potential value opportunities.

Investors should closely monitor the trade negotiations between the U.S. and Mexico. The potential resolution of these tensions could significantly impact Constellation Brands' stock price. As of July 2, 2025, analysts forecast a potential upside of nearly 28% from current levels, with price targets ranging from $170 to $300. GuruFocus estimates a 54.79% upside based on the GF Value metric.

References:
[1] https://seekingalpha.com/news/4467566-constellation-brands-under-fresh-selling-pressure-as-mexico-raises-stakes-in-trade-dispute
[2] https://www.investing.com/news/analyst-ratings/constellation-brands-stock-holds-outperform-rating-at-evercore-amid-tariff-uncertainty-93CH-4134493
[3] https://finance.yahoo.com/news/constellation-brands-stz-gains-upgrade-045528566.html