The Three-Year Outlook for Constellation Brands: Can the Beverage Giant Regain Momentum?

A Once-Dominant Player Faces Headwinds

Constellation Brands (NYSE: STZ) has lost considerable leo luster over the past three years. While the S&P 500 surged over 70%, Constellation’s stock plummeted more than 40%, signaling investor concerns about the company’s direction. The world’s largest alcoholic beverage producer once commanded respect as a blue-chip holding, but recent turbulence has prompted serious questions about its recovery trajectory.

What happened to trigger this decline? The answer lies in a combination of operational challenges, macroeconomic pressures, and shifting consumer behavior that have simultaneously squeezed all three of Constellation’s core business segments.

Understanding the Revenue Slowdown Across Three Business Lines

Constellation’s portfolio spans over 100 beverage brands across three categories. In fiscal 2025, the breakdown was: beer accounted for 84% of revenue (featuring Corona, Modelo, and Pacifico), wines represented 14% (Kim Crawford, Ruffino 1887, The Prisoner), and spirits comprised 4% (Casa Noble Tequila, Svedka Vodka, High West Whiskey).

The Beer Business: From Double-Digit Growth to Single Digits

The beer segment tells a cautionary tale:

Beer revenue growth has compressed dramatically. Several interconnected factors created this perfect storm. First, younger American consumers are simply drinking less alcohol than their predecessors—a demographic shift that impacts the entire industry. More acutely, Hispanic consumers (who drive approximately 50% of beer sales) have tightened spending due to immigration uncertainties and broader economic pressures during recent administrations.

Supply and cost dynamics worsened the situation. Rising tariffs on aluminum cans—which represent nearly 40% of shipments from Mexico—combined with Mexican supply chain disruptions and persistent inflation forced aggressive price increases. These hikes, ironically, suppressed demand further. While Constellation innovated with hard seltzers and alcohol-free alternatives, these efforts couldn’t offset traditional beer volume declines.

Wine and Spirits: A Strategic Retreat

The company’s smaller segments experienced even steeper declines:

To adapt to shifting consumer preferences toward premium products, Constellation divested significant lower-tier wine and spirits inventory. This portfolio optimization reduced overall divisional revenue but concentrated the company on higher-margin offerings. However, the trade-off increased dependence on the struggling beer category—exacerbating overall vulnerability.

Aggregate Impact

Total revenue growth compressed from 7% to just 2% in three years—a trajectory that concerns investors accustomed to consistent expansion.

Profitability Under Pressure: A Temporary Setback

Constellation’s earnings picture has been similarly turbulent. The company posted GAAP losses in fiscal 2022 and 2023, primarily due to its troubled investment in Canadian cannabis operator Canopy Growth (NASDAQ: CGC)—a strategic bet that unraveled. Though fiscal 2024 returned to profitability, another loss appeared in fiscal 2025 as the company booked massive impairment charges related to ongoing business divestitures.

These one-time charges masked underlying operational challenges, though management believes the worst is behind them.

What’s Ahead: The Recovery Roadmap

Near-Term Reality (Fiscal 2026)

Constellation anticipates continued contraction in its first half of fiscal 2026, with revenue declining 10% year-over-year. For the full year, management projects:

• Beer sales down 2-4%
• Wine and spirits sales down 17-20% (on organic basis)
• Total revenue declining 4-6% (on organic basis)

Analyst consensus is even more pessimistic, forecasting an 11% revenue drop for the full year.

Medium-Term Stabilization (Fiscal 2027-2028)

The outlook improves with time:

• Fiscal 2027: Revenue expected to remain nearly flat as the company stabilizes
• Fiscal 2028: Analysts forecast a modest 3% revenue increase as right-sized operations gain traction and macro headwinds ease

On the profitability front, Constellation should return to GAAP profitability in fiscal 2026. Adjusted (non-GAAP) earnings per share projections show:

• Fiscal 2026: Down 4%
• Fiscal 2027: Up 8% (business stabilizing)
• Fiscal 2028: Down 2%

These figures suggest the company can achieve modest recovery through portfolio optimization and reduced one-time charges, though consensus estimates carry inherent uncertainty.

Valuation and Income: A Mixed Signal

Constellation trades at a compelling 12 times forward adjusted earnings—roughly 40% below historical average multiples. The forward dividend yield of 2.9% offers meaningful income compared to broader market averages.

This valuation floor provides downside protection for long-term holders. However, the stock’s upside will likely remain constrained until management convinces the market that its restructured business model can sustain profitable growth while navigating ongoing tariff disputes and consumer preference shifts.

The Three-Year Projection: Sideways Movement Until Proof Points Emerge

Based on current trends and analyst expectations, Constellation’s stock will likely trade sideways over the next three years. The company has neither the catalysts for meaningful appreciation nor the risks that would justify significant declines.

Success hinges on three factors:

1. Portfolio right-sizing: Premium product concentration generating sustainable margins
2. Operational efficiency: Managing tariffs and supply chain costs without continued price increases that throttle demand
3. Consumer adaptation: Stabilizing volume among aging customers while capturing younger demographics through product innovation

Until these pieces align demonstrably—which typically requires 2-3 years of execution—the market will likely remain skeptical, keeping valuations compressed.

Investment Takeaway

Constellation Brands presents a classic turnaround scenario: inexpensive valuation, attractive yield, but uncertain visibility. The company isn’t broken, but it’s not yet broken in the right direction. Investors seeking stability might find appeal in the dividend; those seeking growth should monitor quarterly results for concrete evidence of recovery before deploying capital.