Incoming United States President Donald Trump is looking to make a lot of changes, and one of these will hit one of the biggest names in beer, Constellation Brands (STZ), hard. With both Corona and Modelo in its lineup, the upcoming Trump tariffs are likely to send the prices of these popular beers soaring. And Constellation Brands shareholders, in turn, pulled back, sending shares down nearly 4% in Tuesday afternoon’s trading.
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Constellation Brands manufactures all its beer in Mexico, and with a 25% tariff likely to impact Mexican imports—like Corona and Modelo—that means a hefty price hike on beers that were the go-to following the Dylan Mulvaney incident that torpedoed Bud Light. Worse, Constellation will likely move to hike prices, according to a CNBC report. That would send the prices of their beers up 25% in response to the tariffs.
Constellation is not likely to pivot from its Mexican production, either; an antitrust settlement with Anheuser-Busch InBev (BUD) back in 2013 pretty much requires Constellation to produce the former Grupo Modelo brands in Mexico.
A Potential Workaround
However, a report from the Wall Street Journal suggests that all may not be lost for Constellation Brands. It may even be a simpler fix than expected: it could just ask for an exception. After all—as noted previously—Constellation is producing Modelo et al. in Mexico because it was pretty much required to do so in a previous settlement, not because it wanted to save money and cut out American jobs.
While such a strategy may not pay off, it does certainly have a possibility of success. It also does not hurt that the settlement that required the production scheme was set up before Trump’s first administration, let alone his second. Only time will tell if the tariffs even go through, to begin with, let alone whether Constellation can get an exemption.
Is Constellation Brands Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on STZ stock based on 13 Buys and five Holds assigned in the past three months, as indicated by the graphic below. After a 0.58% loss in its share price over the past year, the average STZ price target of $289.28 per share implies 24.6% upside potential.
