Constellation Lowers Outlook: Time to Panic on Buffett's Big Bet?

Key Points

• Constellation Brands significantly lowered its fiscal 2026 outlook, causing shares to tank so far in September.
• Shares now trade at a paltry forward price-to-earnings (P/E) ratio compared to Constellation's history, with a key long-term tailwind intact.
• Is it time for investors to cut and run, or stay the course?

Constellation Brands NYSE: STZ, one of Warren Buffett's big-time bets at Berkshire Hathaway NYSE: BRK.B, is suffering in September. On Sept. 2, Constellation announced a significant cut to its full-year guidance, which has led to shares falling by almost 10% during the month. This puts a damper on Berkshire’s $2.2 billion investment.

Given the reduction in the firm’s near-term outlook, is it time for investors to hit the panic button on this consumer staples stock? Below, we’ll dive into the numbers and explain why investors should hold their noses, provided that they have a long-term perspective on the stock. All data relating to Berkshire’s portfolio is as of June 30, 2025, unless otherwise indicated. All data on Constellation’s guidance uses midpoint figures.

Constellation Lowers Optimistic Outlook to Industry Norms

Constellation is the owner of some of the world’s most popular Mexican beer brands, such as Corona, Modelo, and Pacifico. In a press release, Constellation provided several downgrades to its fiscal year 2026 guidance, which extends through February 2026. Its comparable earnings per share (EPS) guidance now sits at $11.45. That’s approximately a 10.2% decrease from its previous guidance midpoint.

Additionally, the company now sees net beer sales declining by 3% compared to the previously expected growth of 1.5%. Notably, beer operating income is now forecast to fall by 8%. Prior to the update, Constellation expected this figure to increase by 1%. Ultimately, the firm anticipates it will generate $1.35 billion in free cash flow, a nearly 13% drop from past estimates.

Constellation cited “a challenging macroeconomic environment” as the reason for its guidance decrease. Over the past few months, the company reports a steady decline in sales of high-end beers. This trend is particularly noticeable among Hispanic consumers, who are cutting back on spending more than the general public. As a result, Constellation is feeling the impact, as around 50% of its US sales come from Hispanic consumers.

Clearly, these new numbers are not good for Constellation. However, it is important to note that the company’s outlook is now similar to the overall beer category, as its previous estimates implied outsized growth. This is a notable saving grace amid the guidance cut and weakness among Constellation’s largest customer group.

Additionally, Constellation is showing strength in certain areas. It says that in retail channels, it actually gained the most market share of any beer company in the U.S. from March to mid-August, suggesting that the company is gaining share among non-Hispanics, a positive sign despite the firm’s difficulties. 

Buffett Buys Constellation’s Q2 Drop With Long-Term Perspective in Mind

Buffett and Berkshire's specific thesis on Constellation isn’t clear. However, their main investment principle is widely recognized. They make long-term bets, sticking out short-term fluctuations to generate compounding gains. Examining Berkshire’s portfolio demonstrates this. Approximately $204 billion, or 79% of Berkshire’s current $257 billion portfolio, is in stocks that the firm has owned for at least five years.

Notably, Constellation shares fell by 11% in Q2. In response, Berkshire boosted its position by around 1.4 million shares to 13.4 million shares total. This provides evidence that the firm isn’t just willing to ride out the downturns in Constellation; it's buying the dips.

Shifting demographics in the United States are a key tailwind when it comes to the long-term thesis on Constellation. This comes as Hispanics are driving the majority of population growth in the United States. The United States Census found that the Hispanic population grew by 1.8% from 2022 to 2023, vastly outpacing the 0.2% growth of the non-Hispanic population.

Analysts expect the outsized population growth of Hispanic Americans to continue over the coming decades, regardless of immigration policy. This adds a strong long-term tailwind to Constellation, as Hispanic-American consumers make up such a large percentage of its customer base.

However, these demographic shifts would take place over many years, necessitating a long-term outlook when it comes to investing in Constellation Brands. Additionally, current immigration policy is likely to be a significant near—to mid-term headwind.

Constellation’s Forward P/E Is Near Rock Bottom Levels

Based on Constellation’s forward price-to-earnings (P/E) ratio of approximately 12.5x, the stock looks cheap. This figure is vastly below the stock’s average forward P/E over the last five years of around 19.5x. It is also barely above the stock’s lowest forward P/E over that period of 11.5x.

Overall, Constellation Brands' stock looks like a compelling long-term value opportunity, rather than a name to run and hide from.