Constellation Brands, the company behind popular beer brands like Modelo and Corona, experienced a significant drop in its stock price after announcing a revised, lower growth forecast for the fiscal year 2025. The company cited weak consumer spending and a shift in consumer preferences as the primary reasons for the adjustment, which saw its shares fall by as much as 14% on Friday.

The third-quarter results for Constellation Brands fell short of expectations, with net sales reaching $2.46 billion, missing the consensus estimate of $2.53 billion. Earnings per share, excluding one-time items, were reported at $3.25, below the anticipated $3.31. The company's beer segment, a major revenue driver, saw a 3.2% rise in quarterly depletion growth, a significant decrease from the 8.2% growth recorded the previous year.

In response to these results, Constellation Brands revised its annual net sales growth outlook to a range of 2% to 5%, down from the previously forecasted 4% to 6%. The beer sales growth expectation was also adjusted to between 4% and 7%, from the earlier 6% to 8%. The company's adjusted profit per share for fiscal 2025 is now expected to be between $13.40 and $13.80, a slight decrease from the prior forecast of $13.60 to $13.80.

CEO Bill Newlands commented on the revised outlook, stating, "Given near-term uncertainty on when consumers will revert to more normalized spending, we have prudently lowered our growth outlook." This cautious approach reflects the company's response to the current economic climate and consumer behavior, particularly among lower-income consumers who are trading down to smaller pack sizes and cheaper alternatives.

The company's performance was further impacted by external factors, including a recent statement from the U.S. Surgeon General suggesting that alcoholic drinks should carry cancer risk warnings, similar to tobacco products. This potential regulatory change has added pressure to the already struggling liquor market.

Despite the disappointing quarterly results, Constellation Brands reported a year-to-date operating cash flow increase of 9% to $2.6 billion and a 13% growth in free cash flow to $1.6 billion. The company also declared a quarterly dividend of $1.01 per share, payable on February 21 to stockholders of record as of February 7, 2025.

Analysts remain cautiously optimistic about Constellation Brands' stock, with a Moderate Buy consensus rating based on 11 Buys and four Holds. The average price target of $289.47 suggests a potential upside of 32% from current levels, although these ratings may be revised following the latest earnings report.

As the beverage market continues to evolve, with consumers shifting towards lighter alcoholic options, Constellation Brands is navigating a challenging landscape. The company's strategic moves, such as the sale of Svedka vodka to Sazerac, indicate an effort to adapt to these changing consumer preferences and market conditions.