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Why the Treasury Wine Estates share price is charging higher today

The Treasury Wine Estates Ltd (ASX: TWE) share price is in fine form during morning trade on Wednesday.

At the time of writing the global wine company’s shares are up over 3% to $14.82.

Why is the Treasury Wine Estates share price climbing higher?

One catalyst for today’s gain could be news that U.S. and China trade talks are progressing well.

Not only has this news given the overall market a lift, it is especially good news for companies exporting their products to China such as Treasury Wine Estates, A2 Milk Company Ltd (ASX: A2M), and Blackmores Limited (ASX: BKL).

After all, a strong Chinese economy is likely to translate into strong demand for the consumer products that these companies produce.

In addition to this, Treasury Wine Estates was the subject of a reasonably positive note out of Goldman Sachs on Tuesday.

According to the note, the broker has taken its sell rating off the wine company’s shares and upgraded them to neutral.

Goldman made the move after the Treasury Wine Estates share price fell 23% since the broker declared it as a sell in July. Clearly Goldman was spot on with this call.

Should you invest?

It analysts estimate that the company will achieve underlying earnings per share of 59.6 cents in FY 2019 and then 67.2 cents in FY 2020, representing growth of 15% and 12.9%, respectively.

Based on this forecast its shares are currently changing hands at 25x forward earnings, which I feel is about fair for the company right now given its long term growth opportunities in the massive U.S. and China markets.

In light of this, I would go one better and class Treasury Wine Estates’ shares as a buy, but only if you are prepared to make a patient buy and hold investment.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited and Treasury Wine Estates Limited. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.