Constellation Brands (STZ) PT Lowered to $300 at Bernstein SocGen Group Amid Tariff Risk Caution

Bernstein SocGen Group analyst Nadine Sarwat lowered the price target on Constellation Brands (NYSE: STZ) to $300.00 (from $315.00) while maintaining a Outperform rating.

The analyst commented: "We believe worries surrounding the long-term growth potential of Constellation’s beer segment are overdone. The nature of Constellation’s concentrated portfolio (by both product and geography) means that any evidence of challenged brand health can be a legitimate cause for worry. Q3 depletion growth of 3.2% therefore set some alarm bells off. This is already against a backdrop of investor concern surrounding US alcohol consumption overall, with fears of potential long-term headwinds from moderation, cannabis and GLP-1s.

Tariff overhang. At the extremes, we see two potential paths forward concerning tariffs. (1) The threat of tariffs is used as a negotiation tool only, and is ultimately not implemented (at least not on beer). In this case, Constellation at today’s price is the biggest ‘no-brainer’ in our view. It is trading at just ~11x NTM+1 P/E on our estimates (only ~2 turns higher than TAP!) for ~13% normalized EPS CAGR. (2) A 25% tariff is implemented on Mexican imports. In this scenario we estimate that, with STZ taking some pricing to offset the tariff (plus a1:1 elasticity impact on volumes + negative operating leverage), the hit to EPS would be in the low 20s%. We believe this is largely priced in. Though until clarity tariffs (either way) is achieved, the stock will likely continue to trade sideways.

Net, we reiterate our Outperform rating... but with a dose of caution on tariff risk. We lower our estimates for the latest earnings and scanner data and lower our target multiple from 18.5x to 18.0x to reflect the added uncertainty detailed above. As a result, we lower our Target Price to $300 (from $315)."

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