Treasury Wine Estates: Great business but too much uncertainty for now

About the author:

Belinda Moore
Author name:
By Belinda Moore
Job title:
Senior Analyst
Date posted:
26 May 2023, 7:00 AM
Sectors Covered:
Agriculture, Food & Beverage, Travel and Chemicals

  • Treasury Wine Estates (ASX:TWE) has provided slightly weaker than expected FY23 EBIT guidance which was 2.3% below consensus.  The issues which impacted its 1H23 result (declining low margin wine sales) appear to have worsened, particularly for Treasury Americas and its 19 Crimes portfolio. Importantly, its high margin Luxury wine sales remain strong and in line with expectations.
  • Given the extent of the 2H23 decline in Treasury Americas and the fact that it could continue into FY24, TPB’s COGS pressures and with the consumer under pressure, the outlook for FY24 is uncertain. We have revised our forecasts.
  • We continue to remain attracted to TWE’s luxury brand portfolio (Penfolds) and long-term growth opportunities. However given near term earnings uncertainty, particularly in light of weakening consumer spending, we downgrade to a Hold.

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