Is Constellation Brands Stock a Buy Right Now?

Key Points

• The company is coping with a decline in the popularity of alcoholic drinks in the U.S.

• This includes sliding sales of beer, which is a large part of Constellation's business.

• 10 stocks we like better than Constellation Brands ›

Trends aren't the friends of under-pressure alcoholic beverage giant Constellation Brands (NYSE: STZ) just now. A notable decline in beer consumption is affecting the fundamentals of the alcohol giant, as the vast bulk of its sales comes from such products. Earlier this month, Constellation's management went so far as to chop its annual guidance for the current fiscal year.

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Shifting trends

Americans just aren't drinking as much beer as they did previously. According to statistics compiled by the Brewers Association, overall sales of the libation slumped by more than 1% in 2024 over the previous year.

Image source: Getty Images.

There are several drivers of this dynamic. A major one is a growing disinterest in alcoholic drinks, period. People in this country are relatively more health-conscious these days, and tend to exercise greater care with what they eat and drink.

In August, research firm Gallup published the results of a poll gauging U.S. drinking habits. Among the respondents, 54% said they drink alcoholic beverages -- the lowest rate in the almost 90 years Gallup has been researching the subject. That's down notably from the average of at least 60% from 1997 through 2023 continuously, and lower than the 2024 rate of 58%.

Not a good time to buy a pure play

Constellation is a pure-play alcohol company, and what's more it leans heavily on beer as the owner of America's most popular brew, Modelo, and other famous brands including Corona and Pacifico. In its most recently reported quarter, more than 88% of its $2.5 billion-plus revenue derived from suds (the remainder came from its wine and spirits brands).

Given all that, it wasn't especially shocking when management made that guidance cut in early September. This is a company that feels heavily exposed to negative trends in its business, with no other activity to hedge against the continuing declines. Constellation stock might be cheap now, but I don't consider it a bargain. Personally, I'd leave it alone.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.