It's been a tough couple of years for Constellation Brands (STZ +1.54%) shareholders. Despite a recent rebound effort, the stock's still down to the tune of 40% from its early-2024 peak, reflecting a headwind the entire booze business has faced during the stretch.
As the old saying goes, though, nothing lasts forever. In fact, now may be the right time to plow into this prolonged pullback in anticipation of a continued turnaround. Here are the four top reasons why you might want to make this move sooner than later.
1. Constellation owns two of the best brands in the beer business
Constellation offers a small range of premium sprits like High West whiskey and Casa Noble tequila, along with Ruffino and Drylands wine. Its biggest and best-known products are premium beer brands Modelo and Corona, however, which together account for about 90% of its total revenue.
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This is no trivial detail either. While a recent Gallup Poll indicates a multi-decade low of 54% of U.S. adults now regularly consume alcohol, when the few who do still drink it do so, they're opting for higher-quality premium brands like Constellation's.
That doesn't mean Modelo and Corona sidestepped the broad decline in beer consumption, to be clear. Like many of its direct and indirect competitors, this company's beer revenue is down to the tune of 4% through the nine fiscal months ending in November. It just means that once the cyclical and economically sensitive beer business rebounds, Constellation Brands is well-positioned to capitalize on that recovery.
2. It's tightening its focus on the right products
In the meantime, the company is rethinking its non-beer brands, and shedding the ones that don't make enough sense to stick with from here.
Case in point: In June of last year, Constellation sold its Woodbridge, Meiomi, Robert Mondavi Private Selection, Cook's, and SIMI wine brands so -- as CEO Bill Newlands explained at the time -- Constellation can focus "exclusively on the higher-end that more closely aligns to consumer-led premiumization trends, which we believe will enable us to help deliver improved performance within this segment of our business over time."
It was never a big business for the company; as noted, beer makes up on the order of 90% of its sales. But, to the extent it does matter, this exit will remain a small drag on Constellation's top line through June of this year. After that point, though, not being in the lower-end wine business could make a disproportionally bullish impact, by virtue of allowing management to fully focus on higher-margin products.
3. The stock's on sale (but maybe not for long)
This exit of its lower-end wine brands, along with the waning consumption of beer, has been reflected in the stock's sizable decline.
As is so often the case though, the bears arguably overshot their target. The stock's currently valued at only 14 times fiscal 2026's projected per-share earnings of $11.61, making it cheaper than most of its peers in the consumer staples sector. This pullback has also pumped Constellation Brands' forward-looking dividend up to a solid 2.5%, which is also about as good as you'll find from similar stocks.
NYSE: STZ
Key Data Points
Just don't tarry too long if you'd like to jump in. Shares have started to rally in earnest after marking a multi-year low in November, snapping a downtrend that didn't feel like it was ever going to end. Even if this recent advance stumbles a bit, the bulls may have already sent a subtle message that the bottom has been made.
4. Warren Buffett liked it well enough to let Berkshire buy it
Finally, while it was never entirely clear if Warren Buffett was still making all of Berkshire Hathaway's stock picks by the time he stepped down as the conglomerate's CEO at the end of 2025, there's little doubt he had a hand in the matter, and at least enjoyed veto power on any new prospects.
To this end, Berkshire purchased 5.6 million shares of Constellation Brands back in late 2024 -- when the stock was seemingly still in free fall -- and then more than doubled its position in this company during the first three quarters of last year, before the current recovery effort started taking shape.
Just because Buffett and his lieutenants liked it well enough to take on a small stake doesn't mean you must do the same for your portfolio. But, given his long-term track record, Berkshire's obvious bullishness on Constellation speaks volumes about its plausible future.
