Modelo owner Constellation Brands outlook disappoints as tariffs weigh on forecast

Core Viewpoint - Constellation Brands has provided a weaker-than-expected outlook for fiscal 2026, primarily due to the impact of higher U.S. tariffs on imported beer from Mexico, which is a significant part of its business [1][3][6]. Group 1: Financial Performance - For fiscal 2025 fourth-quarter earnings, Constellation exceeded Wall Street's estimates, reporting adjusted earnings per share of $2.63 compared to the expected $2.28, and revenue of $2.16 billion versus the anticipated $2.13 billion [2][8]. - The company anticipates comparable earnings per share for fiscal 2026 to be in the range of $12.60 to $12.90, significantly below Wall Street's estimate of $13.97 per share [6]. Group 2: Tariff Impact - The Trump administration has imposed a 25% tariff on all imported canned beer and empty aluminum cans, effective April 4, which directly affects Constellation as it imports all its beer from Mexico [3][4]. - Despite a temporary reduction in reciprocal tariffs to 10% for 90 days, this does not apply to sector-specific duties like those on aluminum, which will continue to impact costs [3]. Group 3: Strategic Changes - Constellation plans to reposition its portfolio by divesting from "mainstream" wines and focusing on higher-priced brands, with a recent sale of its Svedka vodka brand to Sazerac [5]. - The company has lowered its medium-term outlook for fiscal 2027 and 2028, projecting enterprise sales growth to be between 2% and 4%, down from a previous estimate of 6% to 8% [7]. Group 4: Capital Expenditures - Constellation plans to reduce its capital expenditures for fiscal 2027 and 2028, projecting a 40% year-over-year decrease in fiscal 2027 and a 35% decrease in fiscal 2028, compared to an earlier outlook of $5 billion in spending from fiscal 2024 to fiscal 2028 [7].