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Constellation Brands Adjusts Forecast Amid Tariff Challenges

In a recent announcement, Constellation Brands, the owner of the popular beer brand Modelo, reported a less favorable outlook for its fiscal 2026, significantly adjusting its medium-term forecasts in light of new U.S. tariffs impacting most of its imported beer products.

On the heels of these revelations, Constellation surpassed Wall Street’s expectations for its fourth-quarter earnings and revenue for fiscal 2025, yet the company’s forward-looking statements overshadowed its quarterly performance. Analysts had anticipated a strong performance; however, the outlook highlights the challenges ahead.

Last week, the Trump administration imposed a 25% tariff on all imported canned beer and empty aluminum cans, set to take effect on April 4. While Trump indicated that reciprocal tariffs on certain countries would be reduced to 10% for 90 days, this interim measure does not extend to specific duties, such as those placed on aluminum products.

Constellation relies heavily on imports from Mexico for its beer production. With iconic brands like Modelo, Corona, and Pacifico making up a staggering 78% of the company’s net sales in the recent quarter, the impact of the tariffs threatens its primary revenue source.

In response to the ongoing struggle within its wine and spirits segment, Constellation announced a strategic shift. The company plans to divest from “mainstream” wines, opting to focus on brands priced at or above $15 per bottle. This decision follows the recent sale of its Svedka vodka brand to Sazerac, aimed at streamlining operations amidst declining sales in its wine and spirits division.

Following the announcement, Constellation’s shares plummeted by 3% in after-hours trading. Despite the market’s immediate response, the company’s stock experienced a 7% increase earlier in the day after the unveiling of Trump’s new trade policies.

Here’s how Constellation’s recent performance compared to analyst estimates based on a survey conducted by LSEG:

• Earnings per share: $2.63 adjusted vs. $2.28 expected
• Revenue: $2.16 billion vs. $2.13 billion expected

Looking ahead to fiscal 2026, Constellation expects its comparable earnings per share to be between $12.60 and $12.90, which falls short of Wall Street’s average estimate of $13.97 per share. Additionally, the company anticipates organic net sales to either decline by 2% or increase by 1%, with beer sales projected to be flat to up 3%.

Constellation also revised its medium-term projections for fiscal years 2027 and 2028, now estimating enterprise sales growth between 2% and 4%, down from an earlier forecast of 6% to 8% growth. Furthermore, the company plans to cut its capital expenditures for fiscal years 2027 and 2028, revising its spending forecast from $5 billion initially projected for fiscal years 2024 to 2028. The new projections suggest a reduction in capital expenditures by 40% year-over-year for fiscal 2027, followed by a 35% decrease in the subsequent fiscal year.

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