27 February, 2025

USA: Constellation Brands downgraded to "Equal-weight" amid concerns over long-term beer volume growth

Morgan Stanley downgraded Constellation Brands (NYSE:STZ) to "Equal-weight" amid concerns over long-term beer volume growth due to shifting consumer trends and also on macroeconomic pressures, Yahoo Finance reported on February 27.

The brokerage pointed to structural challenges, including a decline in alcohol consumption among younger generations, increased health and wellness trends, cannabis competition, and muted overall beer industry growth.

“We are EW STZ, with increased concern over long term beer growth, including pressure from health/wellness, less younger age alcohol consumption than in prior generations, cannabis, competition,” analyst said.

It also flagged near-term pressures such as macroeconomic headwinds, Hispanic consumer sentiment post-elections, and high-end light beer discounting.

Morgan Stanley lowered its long-term beer depletion growth assumptions and noted potential earnings risks from possible Mexico tariffs, which could impact margins as Constellation expands capacity. However, it said the company’s already compressed valuation appears reasonable.

“A more mature STZ brand portfolio&muted category growth, but already compressed STZ valuation looks reasonable.”

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