We recently compiled a list of the 10 Best Beverage Stocks to Buy According to Analysts. In this article, we are going to take a look at where Constellation Brands, Inc. (NYSE:STZ) stands against the other best beverage stocks.
Consumer behavior plays a key role in shaping any industry, and the beverage sector is no exception. The industry is witnessing a noticeable shift in drinking habits, with Americans becoming more conscious about what they consume due to health considerations. There has been an increase in demand for low and no-alcohol beverages, and several companies are jumping on the bandwagon and producing drinks with all of the taste but those that are low on or without alcohol.
READ ALSO: 8 Best Beverage Dividend Stocks To Buy According to Hedge Funds and 50 Drunkest Counties in Every State in the US.
According to a consumer sentiment survey commissioned by NCSolutions (NCS) in early 2024, around 61% of Generation Z intended to cut down on alcohol consumption, representing a 53% year-over-year increase in the share of respondents who said they planned on drinking less alcohol. A little over one-third of the demographic cohort participants said they were interested in trying a beverage that aligns with a sober curious lifestyle.
On the other hand, 49% of millennials responded by saying they plan to reduce their alcohol consumption, an increase of 26% from the survey findings in 2023. Overall, 41% of Americans hoped to drink less in 2024, compared to 34% the year before. These results reflect the gaining popularity of the sober curious movement in the United States, driven by strong interest from the younger generation.
According to Fortune Business Insights, the non-alcoholic beverages market size in the United States was valued at $161 billion in 2023. It is projected to increase to nearly $226 billion by 2030, at a CAGR of 4.91%. The rising popularity of refreshment drinks and mocktails, coupled with innovative marketing and branding strategies of beverage manufacturers are propelling growth in the non-alcoholic beverage market.
Despite consumer behavior shifts within the beverage industry, the overall outlook for the sector is promising. According to a report by Research and Markets, its market size is expected to reach $2.29 trillion by 2030. The industry continues to see robust demand amid rising disposable incomes globally and rapid expansion in developing economies.
However, Trump’s announcement of a 25% tariff on all imported steel and aluminum is a looming threat to the American beverage industry, as about 75% of all new beverage launches in North America now appear in aluminum cans. The tariffs are expected to increase input costs and lead to a rise in prices for end consumers, which could adversely impact struggling categories in the beverage industry.
Methodology
For this article, we sifted through screeners to identify stocks in the beverage industry that had an average share price upside potential of 20% or higher as of the close of day on February 20, 2025. Then we listed the top 10 stocks in ascending order of their average share price upside potential. We have only considered stocks that had at least three analyst ratings.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A winemaker examining a glass of red wine from a barrel in a cellar.
Constellation Brands, Inc. (NYSE:STZ)
Average Share Price Upside Potential as of February 20: 45.38%
Constellation Brands, Inc. (NYSE:STZ) is engaged in the production, marketing, and sale of beer, wine, and spirits. The company has operations in the U.S., Mexico, Italy, and New Zealand. It is one of the best beverage stocks to buy according to analysts.
On February 20, the company announced acquiring a minority stake in Hiyo, a local non-alcoholic beverage brand, that caters to health-conscious consumers favoring moderation. This strategic investment by Constellation Brands, Inc. (NYSE:STZ) reflects the ongoing shift in consumer preferences amid a growing trend to seek flavorful alternatives to alcoholic beverages.
On January 10, Constellation Brands, Inc. (NYSE:STZ) declared financial results for the third quarter of fiscal 2025. It reported net sales of $2.46 billion, missing estimates of $2.53 billion and remaining largely flat compared to the prior year’s period. Its earnings per share of $3.25 also fell short of estimates by 6 cents.
Weak consumer spending pulled third-quarter results below expectations. According to a report in Reuters, lower-income Americans are increasingly shifting toward cheaper beer alternatives, which are hurting sales at Constellation Brands, Inc. (NYSE:STZ). As a result, the company has cut annual sales and profits forecast for the full year. It now expects net sales growth of 2% to 5%, and operating income growth of 6% to 9%.
Despite a challenging market environment, Constellation Brands, Inc. (NYSE:STZ) executed $219 million of share repurchases during the quarter, bringing total year-to-date share repurchases to nearly $670 million. On January 9, the company also declared a cash dividend of $1.01 per share, reiterating its commitment to strong shareholder returns.
Wall Street analysts maintain a consensus Buy rating for the stock and anticipate a 45% uptick, on average, in its share price – hinting at a recovery from the plummeting after the Q3 earnings call. Investor sentiment continues to remain strong. According to Insider Monkey’s database for Q4 2024, 51 hedge funds held a stake in Constellation Brands, Inc. (NYSE:STZ), up from 36 at the end of the third quarter.
Overall STZ ranks 4th on our list of the best beverage stocks to buy according to analysts. While we acknowledge the potential of STZ as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than STZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
