Citi maintains a "Buy" rating on Constellation Brands (STZ), setting a target price of $260, despite potential tariff impacts on its Mexican-brewed beer business. The report examines four scenarios under a proposed 25% tariff, with varying pricing strategies. Without any pricing offset, STZ could see a -28.2% hit to FY26 EPS. A +5% pricing strategy could reduce the impact to -22.6%, while a +10% increase might limit the EPS decline to -16.9%. An all-in scenario, considering a 7.5% price hike, peso devaluation, and deportations, estimates a -14.9% EPS impact.
The report highlights STZ's strategic positioning in the beer market, driven by distribution expansion and brand innovation, despite external headwinds. Citi values STZ at 18x FY26 P/E, aligning with beverage peers, suggesting the current ~13x valuation is an attractive entry point. "We view STZ as well-positioned in the beer category with an attractive portfolio of growing brands and strong distribution strategy," Citi notes.
Constellation Brands closed at $180.80 on January 31, with a slight after-market increase to $180.99.