The beverage industry presents numerous opportunities for investors seeking portfolio growth. Constellation Brands, with its notable presence in the U.S. beer market, holds a strong position, while Coca-Cola is internationally renowned for its extensive soft drink business. Despite both companies historically providing shareholder value, their stock performances have markedly diverged at the beginning of 2025. Currently, Coca-Cola’s stock has seen a 15% year-to-date increase, whereas Constellation Brands has experienced a 16% decline over the same period.
Investors face a decision: maintain investments in Coca-Cola for continued gains, or anticipate a potential comeback for Constellation Brands? An evaluation of each company’s current standing and future prospects offers insights into which stock may be the more strategic purchase presently.
### The Case for Constellation Brands
Economic uncertainty in the U.S. and the trade tariffs introduced by the Trump administration have negatively impacted market sentiment in 2025. Constellation Brands is navigating these challenges, specifically the 20% tariff on imports from Mexico, the origin for nearly all its beer, including Corona and Modelo. This has led to increased per-unit costs that could affect earnings. In response, the company is implementing strategies such as cost reductions, inventory buildup, and modest price increases to sustain profitability.
Despite recent market volatility, Constellation Brands remains a leader, particularly with Modelo as the top-selling beer brand in the U.S., supported by a dedicated customer base. Even amidst disruptions, analysts anticipate a 2% revenue growth this year, alongside a robust 12% rise in earnings per share (EPS), projected at $13.46, underscoring strong demand and sales momentum.
The recent decline in stock price presents a potential investment opportunity, with shares trading at just 13 times the consensus 2025 EPS, marking a significant value when compared to Coca-Cola’s forward P/E ratio of approximately 24. While uncertainties pose short-term challenges, the company’s solid fundamentals and the possibility of temporary tariffs could entice investors to consider long-term holding of the stock.
### The Case for Coca-Cola
Coca-Cola has largely avoided the impact of tariffs thanks to its expansive global supply chain. With a diverse product range exceeding 200 brands, including sports drinks, flavored waters, juices, and dairy products, the company extends beyond traditional soft drinks. This diversification has contributed to Coca-Cola’s stock reaching an all-time high, underlined by a positive business outlook.
In 2024, Coca-Cola’s organic revenue rose by 14% year-over-year, driven by volume growth, higher pricing, and sales premiumization. Adjusted EPS for the full year reached $2.88, representing a 7% increase from 2023. The company remains optimistic about maintaining its growth trajectory in 2025.
One compelling reason to invest in Coca-Cola is its consistent performance across various economic contexts, providing market stability backed by high-quality earnings and cash flow. Additionally, the company boasts a 63-year record of annual dividend increases, recently raising the quarterly dividend by 4.8% to $0.51 per share. Coca-Cola’s current dividend yield is near 3%, surpassing Constellation Brands’ 2.2% yield.
### Decision Time: Buy the Dip in Constellation Brands
Despite the strengths of both companies, the current analysis suggests that Constellation Brands offers the more attractive investment opportunity at this time. Its reduced valuation could lead to an outperformance in 2025. In contrast, Coca-Cola’s stock, having surged significantly this year, might face limited growth due to high expectations that could be difficult to exceed.
For Constellation Brands, the recent steep price drop may have already accounted for some worst-case scenarios, giving the stock a favorable position to excel as financial outcomes validate its fundamental strengths, making it a beneficial addition to a diversified investment portfolio.
