Mexican Beer Could Take A Big Spill From Trump's Victory

Bryan D. Spillane of Bank of America Merrill Lynch believes the victory of Donald Trump in the 2016 U.S. presidential election creates uncertainties for Constellation Brands, Inc. STZ, given Trump’s stance on Mexico, especially regarding trade and immigration.

Spillane downgraded the rating on the company from Buy to Underperform, while lowering the price target from $190 to $150.

Uncertainty Mounts

In FY16, the Mexican beer business accounted for 52.6 percent of the company’s net sales and 63.5 percent of the profits.

In fact, the analyst noted that 100 percent of Constellation Brands’ imported beers are produced in Mexico and imported into the United States, “and a Trump victory creates uncertainty for its future growth.”

Before And After

On the other hand, Bloomberg reported on November 7 that investor speculations that Trump was likely to lose the U.S. presidential election had given the stock a boost.

On November 8, Jim Cramer had noted that Constellation Brands’ shares were not overbought and that he would be a buyer.

Spillane also pointed out that the U.S. tariff on Mexican beer, pre-NAFTA, was 2 percent, while Trump’s campaigned pledged the imposition of 35 percent tariffs on several goods from Mexico.

If this tariff were to be imposed, the analyst believes it could “alter STZ’s present growth trajectory,” although for now, there is “uncertainty regarding the timing of any such moves.”

Posted In: Bank of America Merrill LynchBryan D. SpillaneAnalyst ColorShort IdeasEmerging MarketsDowngradesPrice TargetPoliticsTop StoriesMarketsAnalyst RatingsTrading IdeasGeneral

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