Shares of Constellation Brands (STZ) are getting hit hard today (-17%) after reporting 3QFY25 earnings. The stock has been dealing with concerns about Trump placing 25% tariffs on imports of Mexican goods since Mexican beers like Modelo, Corona and Pacifico make up more than 80% of STZ’s sales.Aaron Back had a prescient article in the WSJ on STZ a couple weeks ago saying that the stock was still too expensive given the substantial risks to its business from the potential tariffs (“Modelo Brewer Awaits Tariff Decision”, December 31, 2024). In addition, US beer consumption has been weak of late with STZ’s depletions increasing only 3.2% in the quarter.But today’s selloff more than prices in these concerns IMO. STZ slightly reduced the lower end of its FY25 EPS guidance from $13.60-$13.80 to $13.40-$13.80. At its current price of $182, STZ is therefore trading at 13.4x the midpoint of current year guidance. Modelo, Corona and Pacifico are first class beers and STZ is a high quality company. The stock also pays a $1.01 quarterly dividend which works out to 2.22% yield at the current price.More By This Author:With Rates Rising Rapidly, Extreme Valuation May Now Be A Problem
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