Constellation Brands Stock Tanks as Tariff Fears Mount

Constellation Brands, Inc. (STZ) stock plummeted on Monday, February 3, 2025, as investors reacted to President Trump's announcement of steep new tariffs on imports from Canada and Mexico. The alcoholic beverage giant, which relies heavily on Mexican beer imports, saw its shares drop by more than 5% in early morning trading. The company's stock price fell to a new 52-week low of $166.02 before rallying to $175.81 late morning, but still down nearly 3% from its previous close of $180.80.

The tariffs, which include a 25% levy on all Mexican imports and an additional 10% tariff on Chinese goods, have sparked fears of a trade war that could crimp corporate profits and dampen consumer spending. Constellation Brands, which imports popular beer brands such as Corona and Modelo from Mexico, is particularly vulnerable to the new tariffs. Piper Sandler analyst Michael Lavery downgraded the company's stock from "overweight" to "neutral" on Monday, citing potential pricing and volume headwinds.

Constellation Brands reported third-quarter fiscal 2025 financial results on January 10, 2025, with sales of $2.64 billion, up 0.2% year-over-year. However, revenue of $2.46 billion missed analyst estimates of $2.53 billion. The company's net income of $615.9 million was up 20.5% year-over-year, but basic earnings per share from continuing operations of $3.40 missed analyst estimates of $3.44. Diluted earnings per share from continuing operations of $3.39 also missed analyst estimates of $3.43.

Constellation Brands' reliance on Mexican imports, particularly for its popular beer brands, exposes the company to potential financial risks in the face of tariffs. According to JPMorgan analyst Andrea Teixeira, the company is the most exposed name in the sector, with approximately 85% of its consolidated sales tied to Mexican beer imports. Teixeira estimates that STZ could see a mid-20s% impact to EPS if no action is taken to offset the tariffs (Source: Benzinga, 2025).

To mitigate these risks, Constellation Brands can employ several strategies, such as pricing adjustments and cost savings, diversifying its supply chain, optimizing its product portfolio, and lobbying for exemptions or reduced tariffs. However, the long-term effects of a trade war between the U.S., Canada, and Mexico on the alcoholic beverage industry could be significant, with Constellation Brands potentially facing increased tariffs, supply chain disruptions, retaliatory measures, consumer behavior changes, and investment and expansion challenges.

Constellation Brands' competitors, such as Anheuser-Busch InBev (BUD) and Molson Coors Beverage Company (TAP), also face potential impacts from the tariffs, but their exposure may differ due to their production and sourcing strategies. BUD's production in the U.S. could help mitigate the impact of Mexican tariffs, while TAP's operations in both the U.S. and Canada might provide some protection. Their responses to the tariffs could involve adjusting their production and sourcing strategies to minimize costs, which could potentially impact Constellation Brands' market position.

In conclusion, Constellation Brands stock tumbled on Monday as investors reacted to President Trump's announcement of steep new tariffs on imports from Canada and Mexico. The company's reliance on Mexican beer imports exposes it to potential financial risks, and the long-term effects of a trade war could be significant. Constellation Brands must employ strategic responses to mitigate these risks and maintain its competitive position in the market.