By Evie Liu

Shares of alcohol giant Constellation Brands tumbled 38% last year. Whether the stock could see a rebound in 2026 will depend on the spending power of Hispanic consumers.

The U.S. distributor of Corona and Modelo beers is set to report fiscal third-quarter earnings on Wednesday after the market closes. For the three months ended in November, analysts polled by FactSet expect the firm to report earnings of $2.64 per share, down 19% from a year ago. Sales are expected to fall by 12% from the year-ago quarter to $2.16 billion.

Alcohol makers are having a hard time as economic concerns have led to fewer group gatherings and convenience store trips. Across beer, wine, and spirits, producers are feeling the pinch as consumers drink less, squeezed by higher prices, increasingly health-conscious habits, and a growing menu of alternative ways to unwind and socialize.

In the quarter ended in August, Constellation's beer sales fell 7% from a year ago. The slowdown was largely due to softer spending from Hispanic consumers, who account for roughly half of Constellation's beer customer base and have shown signs of unease amid changing immigration policies.

Constellation's wine and spirits business has been struggling even more. The company has sold some of its mainstream wine brands to focus more on higher-end brands with richer margins. Those divestitures shrank the segment's top line by 65% year over year in the August quarter.

Constellation has lowered its earnings forecast for fiscal 2026 multiple times. Earnings per share for the whole fiscal year is expected to come in between $9.86 and $10.16, sharply down from $13.78 in fiscal 2025. Management also slashed its sales outlook, now seeing organic net sales declining 4% to 6% in fiscal 2026.

Instead of chasing volume with promotions, Constellation is defending margins. Last year, management announced an organizational structure review and expected to cut annual costs by more than $200 million by fiscal 2028.

The company has also expanded into newer, quicker-growth categories, including low-alcohol products like hard seltzers and nonalcoholic beverages such as Hiyo, a tonic drink infused with botanical and functional ingredients. Those businesses remain small, however, and their growth hasn't been enough to offset weakness in beer and wine.

Despite attractive valuations relative to history, alcohol stocks will likely stay stuck for some time, wrote Deutsche Bank analyst Steve Powers. Although the 2026 World Cup could potentially bolster sales next summer, other headwinds would continue to weigh down the group, he wrote.

Signs of recovering Hispanic spending and a clear outlook of beer volume rebound are necessary for the stock's multiple to recover. But the possibility appears limited for now, wrote J.P. Morgan analyst Drew Levine.

Still, many on Wall Street believe that Constellation stock is oversold. Nearly 60% of the analysts polled by FactSet have a Buy rating for Constellation shares, with an average target price of $168, suggesting an 18% upside from the current price around $142.

Write to Evie Liu at evie.liu@barrons.com

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January 07, 2026 03:00 ET (08:00 GMT)

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