Things have continued to go wrong for Constellation Brands (STZ 0.90%), particularly over the last year.
Rising tariffs have caused worries about the sales of its top beer brands, particularly Modelo, which is the U.S.'s No. 1-selling beer. Americans are also drinking less across the board, further reducing the company's sales.
Amid such conditions, the alcohol producer and distributor has drawn a prominent investor in Warren Buffett's Berkshire Hathaway, which added shares despite being a net seller of stocks. The question now is whether the challenging conditions can play into investors' hands in 2026.
Image source: Getty Images.
Where Constellation Brands stands
In 2025, even as Buffett's team bought the stock, conditions had deteriorated. In the first half of fiscal 2026 (ended Sept. 30), net sales fell more than 10% to $5 billion.
During that time, the company managed to earn $982 million. While that was an increase, the only reason earnings rose was because Constellation experienced a goodwill impairment of nearly $2.3 billion in the first half of 2024.
Amid such conditions, the stock has lost almost 35% of its value over the last year.
NYSE: STZ
Key Data Points
What to look for in 2026
Nonetheless, in that state, the stock appears oversold, setting the stage for a possible recovery in 2026.
Buffett's interest in the stock has little to do with it, though the team at Berkshire may have keyed on these conditions.
First is Constellation's valuation. The aforementioned goodwill impairment likely raised its price-to-earnings (P/E) ratio to 21, but a forward P/E of 13 is cheap by any measure.
Moreover, the company has paid a dividend and increased it annually since 2015. The current annual payout of $4.08 per share offers a dividend yield of 2.8%, far above the 1.1% average of the S&P 500.
Additionally, Constellation is on track for between $1.3 billion and $1.4 billion in free cash flow in fiscal 2026. That can cover its yearly dividend cost of approximately $725 million. It can also finance share repurchases. Since the outstanding share count fell by more than 3% in the last year alone, share prices stand a higher chance of rebounding in 2026.
Constellation Brands stock in 2026
The current state of Constellation Brands could begin to stoke a recovery in the stock in 2026.
Admittedly, a trend away from alcohol consumption and the rising tariffs rightly concern investors. However, that also shows that alcohol consumption is not going away. It is merely shrinking, and the stock's 40% decline indicates that investors may have overreacted.
By buying Constellation stock now, investors get in at a low valuation and benefit from a high and rising dividend return. That payout could increase demand for shares at a time when buybacks have reduced the number of available shares.
Thus, even if sales struggle in the near term, Constellation can still turn into a market-beating growth and income stock in 2026.
