Altria vs. Constellation Brands: Which Blue Chip Stock Is the Better Investment?

Altria vs. Constellation Brands: Which Blue Chip Stock Is the Better Investment?

Constellation Brands (NYSE: STZ) and Altria Group (NYSE: MO) are frequently regarded as reliable blue chip stocks, particularly appealing to income-focused investors. While Constellation Brands is a global leader in beers, wines, and spirits, Altria stands as America’s largest tobacco company.

Yet, over the last three years, Constellation’s stock has dropped almost 30%, whereas Altria has surged over 40%. Here’s a closer look at why Altria has outperformed Constellation—and whether this trend is likely to continue.

What’s Holding Constellation Brands Back?

Constellation Brands generates most of its revenue from its popular beer brands, including Modelo, Corona, and Pacifico. Its wine and spirits segment, featuring brands like Kim Crawford and Casa Noble Tequila, accounts for a smaller share. Almost all of its revenue is derived from the U.S. market.

The company faces several challenges:

• Shifting consumer preferences: Younger consumers are drinking less beer. To adapt, Constellation is expanding into new beverage categories, such as hard seltzers and alcohol-free drinks.
• Declining lower-end wine sales: The company has responded by selling off less profitable wine brands to focus on its premium offerings.
• Tariff pressures: U.S. tariffs, especially on aluminum, have increased costs on imports of its best-selling Mexican beers. Although the company is shifting more shipments to glass bottles, nearly 40% of its beer imports still arrive in cans, keeping pressure on margins. Production bottlenecks at its Mexican plants have added further complications.

These headwinds—coupled with ongoing inflation and operational constraints—have limited Constellation’s revenue growth. Analysts forecast a revenue decrease from $10.2 billion in 2024 to $9.9 billion by 2027, even as EPS is expected to grow at about 7% annually.

Although the stock trades at an attractive valuation around 14 times forward earnings and offers a 2.5% dividend yield, limited growth catalysts suggest its upside may remain capped for now.

Why Has Altria Outperformed?

Altria derives most of its revenue from Marlboro and other tobacco products, with a diversified portfolio that also includes e-cigarettes, cigars, and nicotine pouches. Since spinning off Philip Morris International in 2008, Altria is largely focused on the U.S. market.

This domestic focus shields Altria from tariff and currency risks, but U.S. smoking rates continue to decline. In response, Altria has counterbalanced lower shipments with price increases, major cost cuts, and significant share buybacks. Importantly, the company is investing heavily in smokeless products—most notably e-cigarettes and nicotine pouches.

Following its costly 2022 investment in Juul, which was written down after an FDA ban, Altria acquired FDA-approved Njoy e-cigarettes in 2023. This acquisition is anticipated to boost the company’s earnings from 2026 onwards.

Looking ahead, analysts expect Altria’s adjusted revenue to edge slightly down from $20.4 billion in 2024 to $20.2 billion in 2027, with its core cigarette business continuing to shrink. While EPS may dip in the near term due to the loss of one-time tax benefits and the sale of Iqos rights, Altria’s long-term EPS is projected to rise at a 5% annual rate through 2027. The stock remains attractively valued at 12 times forward earnings with a robust 7% dividend yield.

Which Stock Is the Better Buy?

Constellation Brands may eventually stabilize, but current headwinds and a lack of growth drivers dim the near-term outlook. In contrast, Altria’s business appears steadier. It offers a higher dividend yield and trades at a lower earnings multiple. While both companies face industry-specific challenges, Altria seems better positioned for income-driven investors seeking stability and value.

--- This content is for informational purposes only and does not constitute financial advice.