Beer Stock Could Be Big Tariff Loser

STZ stock has had a horrible few weeks

by Josh Selway

Published on May 31, 2019 at 9:22 AM

Markets are reeling this morning after President Donald Trump said he will impose tariffs on imports from Mexico, and that's obviously bad news for the iShares MSCI Mexico ETF (EWW). The Mexican exchange-traded fund (ETF) is set to open down 5% at $42.30, which would be its worst day of 2019.

However, not everyone may be a loser during the pullback. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows heavy put buying on EWW, with the 10-day put/call volume ratio of 15.74 ranking just 3 percentage points from a 12-month extreme. Said simply, many traders stood to profit from a decline in the ETF.

As for the individual stocks that could be hurt by the tariff news, the auto sector is probably the primary loser, but J.P. Morgan Securities analysts identified Corona producer Constellation Brands, Inc. (NYSE:STZ) as a loser, as well. According to a note released this morning from the firm, roughly 73% of the company's revenue comes from Mexican imports.

Analysts at Bernstein also weighed in, saying the 5% tariffs on Mexican imports could cut into STZ's imported beer profits by 7%. The stock is set to open this morning down 7.2% at $173.82, extending a recent sell-off from its April 26 year-to-date high near $215.

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