Analysts are adjusting their price target on shares of the parent company of Corona beer on sales

If you had a job like that, you wouldn’t miss a day of work.

Five thousand years ago, employers in the ancient city of Uruk used a specific currency to pay their workers: beer.

Analysts are adjusting their price targets for Constellation Brands.

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Tablets excavated from the area record the amount of foam allocated to each worker, according to New Scientist, in what is believed to be the world’s oldest known pay bolt.

But tastes have changed over the millennia, and while people may cry, they don’t in their beer.

In 2023, Americans consumed the lowest level of beer in a generation, switching from traditional favorites to other forms of alcohol—and, in increasing numbers, avoiding alcoholic beverages altogether.

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“It’s been a tough year for beer,” David Steinman, vice president and executive editor of Beer Marketer’s Insights, told NBC News in December.

Industry analysts pointed to several factors for the struggling numbers, including competition from new alcohol products, many of which come from non-traditional producers.

And consumers aren’t just stopping brewskis. Young people are reducing their consumption of alcoholic beverages in general.

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Younger adults are less likely to drink alcohol

A Gallup poll last year found that 62 percent of adults under 35 said they drink, down from 72 percent two decades ago. Young adults also drink less often and are less likely to binge drink.

Gallup said the main reason for the decline in drinking among young adults may be a greater diversification of their racial and ethnic makeup than has occurred among middle-aged and older adults.

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The percentage of 18- to 34-year-olds who are black, Hispanic, Asian or another racial minority has nearly doubled over the past two decades, Gallup said, noting that non-white Americans have consistently been less white americans are likely to drink. alcohol.

In addition, growing public concern about the health risks of drinking, especially among young adults, may be behind these changes, Gallup said.

The increased use of marijuana by young adults in recent years may be another factor in their declining interest in alcohol.

Constellation Brands CEO cites ‘macro headwinds’

Constellation Brands (or grid) which owns the US rights to imported beers such as Corona, Modelo Especial, Negra Modelo and Pacífico, recently adjusted its asset write-down due to weak wine sales.

The company said the non-cash goodwill impairment of $1.5 billion to $2.5 billion would hurt second-quarter results.

Constellation cited continued negative trends primarily in its U.S. wholesale market driven by declines in both the overall wine market and its core and premium brands.

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At the same time, “while current macroeconomic headwinds, particularly rising unemployment, have led to a recent deceleration in the growth rate of consumer demand for our products, we are on track to deliver solid single-digit volume growth in this fiscal budget. year for our beer business,” Constellation Brands Chairman and CEO Bill Newlands said in a statement.

These trends, Newland added, “were most notable in the top five states for our beer business, which represents just over half of our volumes.”

“However, we continue to see volume growth in the low to mid-single digits in these states and mid-high single digits in the rest of the country,” he said.

Constellation, which is scheduled to report earnings next month, cut its fiscal 2025 earnings forecast to between $3.05 and $7.92 a share, down from an initial expectation of $14.63 to $14.93 per action.

Analyst notes ‘US beer category challenged’

The company lowered its overall sales outlook to between 4% and 6% from between 6% and 7%.

Chief Financial Officer Garth Hankinson said the company remained “confident in our ability to meet our initial expectations of double-digit comparable EPS growth and raised the lower end of our initial comparable EPS guidance range for fiscal 2025.” .

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The largest US beer importer by sales, Constellation has more than 100 brands in its portfolio, including wines such as Robert Mondavi, Meiomi, Simi Winery and Ruffino.

The Rochester, NY-based company also owns spirits brands such as Svedka Vodka, Casa Noble Tequila and High West Whiskey

In July, Constellation Brands beat Wall Street expectations for first-quarter earnings but missed revenue forecasts.

Newlands noted “the continued growth of our beer business, which achieved the second largest share gain in the total drinks industry, as well as once again the largest share gain in all spirits.”

He also told analysts of “challenging dynamics … particularly in most wine price segments.”

These headwinds were the main drivers of the 7% decline in net sales for that business in the first quarter,” Newlands said.

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Investment firms revised their price targets for Constellation Brands, including Roth MKM, which earlier this month cut its target to $298 from $303 but affirmed a buy rating on the stock.

The firm cited Constellation’s reduction in the company’s net sales growth outlook and the deterioration of Wine & Spirits.

However, many investors already expected that outlook and were reassured by the slight increase in Constellation’s adjusted earnings outlook, the investment firm said.

Barclays raised its price target for the company to $309 from $295 and maintained an overweight rating on the stock.

In light of what remains a contested US beer category, the firm lowered industry volume assumptions by one percentage point for 2024 and 2025.

The summer sales season did little to correct the US beer industry, with Constellation’s guidance update in early September validating the muted picture painted by the scanner data, Barclays said.

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