The last move of Berkshire Hathaway, The holding company directed by Warren Buffett, generated an impact on the markets: the firm acquired 5.6 million shares of Constellation Brands (STZ) at the end of 2024, consolidating as the sixth largest shareholder of the alcoholic beverage giant. The news caused a 5% leap in the company’s price on Tuesday, reflecting the influence that Buffett still maintains on Wall Street. However, beyond the back of the “Oracle of Omaha”, concerns persist around the company, which faces a context of volatile sales and structural challenges.
The CFRA analyst, Garrett Nelson, stressed that Berkshire Hathaway’s investment represents a significant vote of confidence for Constellation Brands, a company that has not had an outstanding performance in recent times. Despite the good sign that the purchase implies, the market context is not entirely favorable: Constellation shares have fallen by 23% so far this year, which suggests that Buffett’s bet could take fruits .
Investment or short -term risk opportunity
Despite the positive signal of Berkshire Hathaway, the 23% drop in the value of the actions of Constellation Brands so far this year suggests that the firm already faces losses in this investment. However, analysts believe that Buffett team has evaluated the purchase with a medium and long term vision.
Currently, the price-benefit multiple in the future of Constellation Brands is 10.92, the lowest in more than a decade and comparable to the 10.19 of Molson Coors (TAP) and the 14.86 of Anheuser-Busch (Bud ). This indicates some market skepticism regarding the future profits of the company.
Factors that generate concern
Constellation Brands did not meet the expectations of Wall Street in the third quarter, with a 3.9%beer volume growth, while wine volumes and liquors fell by 11.6%, both below the projected. In addition, the company reduced its net sales forecast for fiscal year 2025 to a range of 2% to 5%, below the previous forecast from 4% to 6%.
Another uncertainty factor is the possible imposition of a 25% tariff on Mexican imports, which could directly impact Constellation Brands’s profitability. The company faces the dilemma of moving the cost to consumers, which would affect demand, or absorb it, which would reduce its margins.
Perspectives for constellation brands
Despite the challenges, the company maintains a solid free cash flow, exceeding one billion dollars annually, even after capacity expanding. In addition, the model brand, one of its main bets in the US market, continues to grow at a higher rate than the industry and gain market share.
However, pessimism in the basic consumer goods sector, promoted by policies such as the “Make America Healthy Again” initiative by President Donald Trump, has impacted the performance of several beverage companies, including PepsiC, Coca-Cola and Boston Beer Company
In this context, Berkshire Hathaway’s investment in Constellation Brands is a sign of trust, but short -term risks continue to be a surveillance factor for investors.
Source: Ambito
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