Constellation Brands Dips 9% in a Month: Time to Buy or Red Flag?

Constellation Brands, Inc. STZ has seen its shares slide 9.1% in the past month. STZ’s downside was more pronounced after it reported soft third-quarter fiscal 2025 results on Jan. 10, where the company missed revenue and earnings expectations. The company’s share performance contrasts with the broader industry’s decline of 0.8%, the Consumer Staples sector’s rise of 3.1% and the S&P 500’s growth of 3.2% in the same period.STZ Stock's Past One Month PerformanceImage Source: Zacks Investment ResearchConstellation Brands' third-quarter fiscal 2025 results showed a 0.4% year-over-year decline in revenues, largely due to continued weakness in its wine and spirits business. Sales in this segment fell 14%, following a 12% decline in the prior quarter. The downside was primarily attributed to soft consumer demand and retailer inventory destocking in the U.S. wholesale market, particularly in the lower-priced wine category.Key contributors to the decline in the wine and spirits business included a 16.4% drop in shipment volumes and a 4.3% decrease in depletions, reflecting ongoing demand challenges and inventory management. Constellation Brands emphasized that weakness in the wine category, especially in the lower price segments, remains a significant headwind.Operating income for the wine and spirits segment fell 25% year over year, with the segment's operating margin declining 333 bps as sales declines outpaced reductions in the cost of goods sold and SG&A expenses.Other Factors Behind Constellation Brands Stock DeclineConstellation Brands continues to face inflationary pressures, leading to higher packaging and raw material costs, while increased depreciation and operating expenses from brewery capacity expansions have further weighed on profitability. The beer segment's operating margin declined 60 basis points (bps) in the fiscal third quarter impacted by higher marketing spend and elevated depreciation costs, partially offset by favorable pricing.The company has been witnessing a challenging operating backdrop, including the ongoing consumer dynamics. The subdued overall spending and prolonged value-seeking behavior in consumers might affect the company’s demand. Also, the macro shifts, mainly any change from potential tariff policies, might act as deterrents.As a result, the company now envisions a comparable EPS of $13.40-$13.80 for fiscal 2025 compared with the earlier estimate of $13.60-$13.80. STZ anticipates enterprise operating income on a reported basis to decline 62-65% for fiscal 2025.Constellation Brands’ fiscal 2025 outlook reflects mixed performance expectations across its segments. The company forecasts enterprise net sales growth of 2-5% with 4-7% sales growth for the beer segment. However, sales for the wine and spirits segment are expected to decline 5-8%. The company expects operating income to improve 9-12% for the beer segment and decline 17-19% for the wine and spirits segment. Corporate expenses are expected to be $250 million and net interest expenses are predicted to be $410 million for fiscal 2025.Can STZ’s Growth Strategies Drive Long-Term Success?Despite challenges, Constellation Brands' focus on premiumization is driving strong growth, particularly through its high-end Power Brands in Wine and Spirits. The company is strategically shifting its portfolio toward premium offerings that align with evolving consumer preferences.To support rising demand for its Mexican beer portfolio and emerging Alternative Beverage Alcohol products like hard seltzers, Constellation is expanding its brewing capacity in Mexico. At the end of fiscal 2024, the company had 48 million hectoliters of production capacity across its Mexican facilities, reinforcing its strong operational foundation.Looking ahead, Constellation plans to invest nearly $3 billion from fiscal 2025 to 2028 in modular expansions at its existing breweries and the development of a third brewing site in Veracruz. These strategic investments will ensure the company scales production efficiently to meet growing market demand while strengthening its leadership in the premium beverage alcohol segment.Final Words on STZ StockThe near-term headwinds from softer earnings and muted guidance indicates that the STZ stock lacks near-term growth potential. While its long-term strategies provide a foundation for recovery, concerns around declining margins, elevated cost and reduced earnings forecasts suggest caution. For now, investors may wait for signs of stabilization in earnings and margin trends before considering a position in STZ. Constellation Brands currently carries a Zacks Rank #4 (Sell).Don’t Miss These Solid BetsUnited Natural Foods, Inc. UNFI currently sports a Zacks Rank of 1 (Strong Buy). UNFI delivered a trailing four-quarter earnings surprise of 553.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.The consensus estimate for United Natural’s fiscal 2025 sales and earnings indicates growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figure.TreeHouse Foods THS, a private brand snacks and beverages company, presently holds a Zacks Rank #2 (Buy). THS delivered a trailing four-quarter earnings surprise of 20.4%, on average.The Zacks Consensus Estimate for TreeHouse Foods’ 2025 sales and earnings implies growth of 4.3% and 20.7%, respectively, from the year-ago period’s reported figure.US Foods Holding USFD, which engages in the marketing, sale and distribution of fresh, frozen, and dry food and non-food products, currently carries a Zacks Rank #2. USFD delivered a negative earnings surprise of 3.7% in the last reported quarter.The consensus estimate for US Foods’ 2025 sales and earnings calls for growth of 6.4% and 10.6%, respectively, from the prior-year reported levels.Just Released: Zacks Top 10 Stocks for 2025Hurry – you can still get in early on our 10 top tickers for 2025. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2025. You can still be among the first to see these just-released stocks with enormous potential. See New Top 10 Stocks >>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 Constellation Brands Inc (STZ): Free Stock Analysis Report United Natural Foods, Inc. (UNFI): Free Stock Analysis Report TreeHouse Foods, Inc. (THS): Free Stock Analysis Report US Foods Holding Corp. (USFD): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks