Constellation Brands (STZ) faces structural and cyclical beer volume headwinds, Morgan Stanley said in a Friday note.

The company as expected lowered its mid-term algorithm, although the magnitude of the reduction was greater than expected, Morgan Stanley analysts said.

The company reduced its beer sales growth target to 2-4% from 7-9%, including 1-2% pricing, which implies 1-2% volume growth, the analysts said, adding that Constellation confirmed that it is compliant with the United States-Mexico-Canada Agreement and that the guidance includes the impact of tariffs.

The company's Wine and Spirits topline guidance of -20% to -17% and profit decline guidance of -100% to -97% is well below the Street consensus, due to Constellation's divestiture of low- and mid-end wine brands to The Wine Group, and distributor contractual payment timing, the analysts said.

Morgan Stanley reiterated the company's stock rating at equal-weight and lowered the price target to $195 from $202.

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