Constellation Brands Dips 5% in 6 Months: Hold the Baton or Exit?

Constellation Brands Inc. STZ stock has rolled down 5.5% in the past six months, reflecting an underperformance from the broader industry’s 3.1% decline. The stock also shows a dismal performance compared with the Consumer Staples sector’s growth of 3% and the S&P 500’s rally of 12.5% in the same period.At the current price of $239.45, the STZ stock trades at a discount of 12.9% to its 52-week high of $274.87. The current stock price reflects a 6.5% premium from its 52-week low mark. ANF trades below its 50-day moving average, indicating a bearish sentiment.STZ Stock’s 6-Month Performance Image Source: Zacks Investment Research What’s Hindering STZ’s Stock Performance?The decline in the Corona maker’s stock has been influenced by continued softness in the wine and spirits segment, which reported a 12% dip in the second quarter of fiscal 2025, wider than a decrease of 7% in the preceding quarter. The deterioration reflects a steep 9.8% reduction in shipment volumes and a 17.6% fall in depletions, underscoring persistent softness in consumer demand. The soft volumes stemmed from challenging market conditions, particularly in the U.S. wholesale channel for most price segments in the wine category.Shifting consumer preferences and competitive pressures have compounded these issues, making it increasingly difficult for Constellation Brands to regain traction in this segment. For fiscal 2025, sales are expected to decline 4-6% year over year for the wine and spirits segment.As a result, Constellation Brands has been transitioning its wine and spirits portfolio toward higher-end brands that align better with consumer-led premiumization trends. In recent years, STZ sold most of its mainstream wine and spirits brands across its portfolio, thus aggressively concentrating on premium wine and craft spirits categories. While such moves are expected to meet the company’s growth goals and bolster its overall performance in the long term, the challenges are expected to persist in the near term.Will Strategies Support STZ’s Turnaround?While the wine and spirits business remains dismal, Constellation Brands' premiumization strategy is proving successful, as demonstrated by accelerated growth of its Power Brands. Key growth drivers included the company's high-end Power Brands, such as The Prisoner Brand Family, Kim Crawford and Meiomi.The beer segment also experienced gains from premiumization, driven by growth in traditional beer and flavored categories, including seltzers, flavored beer, RTD spirits and flavored malt beverages. The company is investing in its Power Brands through innovation and capitalizing on priority consumer trends with successful product introductions.Additionally, Constellation Brands is strategically positioned, thanks to its strength in the beer business. This was evident from the 6% year-over-year increase in the fiscal second quarter’s net sales for the beer business. Depletion volumes were aided by robust demand for most of its brand portfolio, led by strength in the Modelo Especial, Pacifico and Modelo Chelada brands.Constellation Brands is advancing its plans to expand brewing capacity in Mexico, aiming to support the growing demand for its high-end Mexican beer portfolio and the emerging Alternative Beverage Alcohol segment, including hard seltzers. At the end of fiscal 2024, the Zacks Rank #3 (Hold) company had approximately 48 million hectoliters of production capacity across its facilities in Mexico, highlighting its strong operational base in the region.Despite the adverse impacts of the ongoing macroeconomic challenges on its consumers, Constellation Brands expects its Beer brands to remain strong. As a result, STZ expects to deliver strong beer volumes for fiscal 2025. Management anticipates an enterprise net sales increase of 4-6% for fiscal 2025, with 6-8% sales growth for the beer segment. STZ anticipates comparable operating income to improve 8-9% in fiscal 2025. The company expects operating income to improve 11-12% for the beer segment and the operating margin to be 39% in fiscal 2025. The company reiterated its recently revised comparable EPS guidance of $13.60-$13.80 per share for fiscal 2025.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Stocks to ConsiderThe Duckhorn Portfolio NAPA, a premier producer of wines principally in North America, currently has a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The consensus estimate for Duckhorn’s current financial-year sales and EPS indicates growth of 19.5% and 8.3%, respectively, from the prior-year reported levels. NAPA has a trailing four-quarter average earnings surprise of 13.3%.Freshpet, Inc. FRPT, a pet food company, has a trailing four-quarter average earnings surprise of 144.5%. FRPT currently carries a Zacks Rank #2.The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS indicates growth of 27.3% and 228.6%, respectively, from the prior-year reported levels.US Foods USFD, a foodservice distributor serving independent and multi-unit restaurants, healthcare and hospitality entities, government and educational institutions, currently carries a Zacks Rank #2.The Zacks Consensus Estimate for US Foods’ current financial-year sales and EPS indicates growth of 6.4% and 18.6%, respectively, from the year-ago reported figures. USFD has a trailing four-quarter negative earnings surprise of 0.4%, on average.Free Report: 5 Clean Energy Stocks with Massive UpsideEnergy is the backbone of our economy. It’s a multi-trillion dollar industry that has created some of the world’s largest and most profitable companies.Now state-of-the-art technology is paving the way for clean energy sources to overtake “old-fashioned” fossil fuels. Trillions of dollars are already pouring into clean energy initiatives, from solar power to hydrogen fuel cells.Emerging leaders from this space could be some of the most exciting stocks in your portfolio.Download Nuclear to Solar: 5 Stocks Powering the Future to see Zacks’ top picks free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Freshpet, Inc. (FRPT): Free Stock Analysis Report Constellation Brands Inc (STZ): Free Stock Analysis Report US Foods Holding Corp. (USFD): Free Stock Analysis Report The Duckhorn Portfolio, Inc. 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