Stock of the day: Treasury Wine Estates
As US tariffs on European wine loom, Treasury Wine Estates is poised for growth, leveraging its diverse business divisions and strategic market approach.
(AI video summary)
This video was created on 17 March for IG audiences by ausbiz.
ASX code:TWE
Tariff impacts on Treasury Wine Estates
Treasury Wine Estates is currently in the spotlight as potential tariff changes could significantly impact its business. The United States (US) President has proposed a 200% levy on European wine, which could benefit Treasury Wine Estates by reducing competition in the US market.
The potential tariffs could increase European wine prices by 150%, providing a tailwind for Treasury Wine Estates. Additionally, there is speculation that Constellation Brands, a key competitor, might sell some of its wine brands, which could further benefit Treasury Wine Estates.
Business divisions and market dynamics
Treasury Wine Estates exports US wines to Australia and Australian wines to the US, with a significant portion of its business focused on the latter. Treasury Wine Estates operates through three main divisions: Penfolds, Treasury Americas, and the premium segment. Penfolds, a major contributor to its revenue, is expected to benefit from renewed access to the Chinese market, where demand remains strong.
Despite some challenges in the premium segment, the company is well-positioned to capitalise on growth opportunities. Trading at a projected fiscal year (FY) 2026 price-to-earnings (P/E) ratio of 14.5 times and offering a yield of 4.7%, Treasury Wine Estates is considered attractively priced by analysts.
Investment outlook
Analysts from Morgans and Ord Minnett have a positive outlook on Treasury Wine Estates, both issuing 'buy' recommendations.
Citi has rated the stock a 'buy' with a target price of $13.85 per share. However, Citi warns that European wine producers may shift their focus to other markets, like China, potentially offsetting some of Treasury Wine Estates' anticipated gains.
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