Constellation Brands (STZ) faced a challenging fiscal Q3 2025, with Citi reporting misses across key metrics, including beer topline growth of 3.2% and beer depletions growth of 3.2%, both below expectations. The company also lowered its FY25 guidance, with beer net sales growth now projected at 4-7% (down from 6-8%) and adjusted EPS revised to $13.40-$13.80 (from $13.60-$13.80). Despite these setbacks, Citi maintains a "Buy" rating, citing the current valuation of approximately 13x FY26 P/E as reflecting many of the existing concerns, such as tariffs, immigration issues, and California wildfires.
The report highlights a significant 17% stock reaction to the soft Q3 results, driven by value-seeking behaviors among consumers, particularly within the Hispanic demographic, and weakness in gas, convenience, and liquor store channels. Beer margins also fell short, decreasing 60bps y/y to 37.9%, due to higher marketing spend and depreciation expenses. Citi notes, "We believe valuation of ~12.8x on our lowered FY’26 EPS reflects many of these concerns and remain Buy-rated on the stock."
Constellation Brands closed at $181.81 on January 10, 2025, with a slight after-market increase of 0.1%.