Why the Treasury Wine (ASX:TWE) share price has soared 24% in 2021

Why the Aussie winemaker's shares are on the charge in 2021…

| More on:
wine share price rising represented by two people raising wine glasses

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Treasury Wine Estates Ltd (ASX: TWE) share price has gotten off to a flyer in 2021. While the S&P/ASX 200 Index (ASX: XJO) has gained 9.1%, Treasury Wines has soared 24.4% higher this year.

So, what's helping the Aussie wine business' shares outperform this year?

Why the Treasury Wine share price has soared in 2021

It always pays to look at recent announcements when analysing share price performance. For Treasury Wine, it's been a busy start to the year.

There has been quite a bit of volatility in the Treasury Wine share price in the last 12 months or so. One of the biggest factors was the threat of increased tariffs from China.

China is a major purchaser of Aussie wines and Treasury Wine shares sank in March after China slapped a 175% tariff on the company's Australian country of origin wine in containers of two litres or less for the next 5 years.

However, the Treasury Wine share price isn't up 24% this year for nothing. In fact, since that March 29 announcement, shares in the wine group are up more than 12%.

A strong strategic & financial update has certainly helped. The Treasury Wine share price shot 11.5% in the space of 5 trading days after its 2021 Investor Day announcements on May 12.

Treasury Wines flagged a 33% jump in second half earnings before interest, tax, the agricultural accounting standard SGARA and material items (EBITS). The group expects FY21 EBITS of $495 million to $515 million, which was above then-market expectations.

Strong EBITS margins across key portfolios like Penfolds (40-45% target) and Treasury Americas (25% target), combined with plans to slash its cost base, had investors buying in.

That helped propel the Treasury Wine share price to climb higher in May. That momentum has been continued in June and July despite no further announcements from the Aussie group.

Treasury Wine isn't the only Aussie wine share on the move right now. The Digital Wine Ventures Ltd (ASX: DW8) share price slumped 12% lower on Monday after announcing a strategic acquisition.

The Aussie online wine seller will acquire Parton Wine Group after raising $7.5 million from its investors. Investors sold down on the news with the Digital Wine share price slumping lower.

Foolish takeaway

The Treasury Wine share price has been outperforming so far this year. Beaten down on the China tariff news, strong earnings and cost-cutting have helped fuel the Aussie wine group's valuation in 2021.

Investors will be watching the company's 19 August results release closely for further indications of growth.

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

Smiling couple looking at a phone at a bargain opportunity.
Share Gainers

Why Gentrack, New Hope, Nuix, and Star Entertainment shares are charging higher

These shares are starting the week strongly. But why?

Read more »

Sports fans looking at smart phone representing surging pointsbet share price
Share Gainers

Guess which ASX All Ords share just rocketed 25% on an earnings upgrade

Investors are bidding up the ASX All Ords share following an improved FY 2024 earnings outlook.

Read more »

A woman's hand draws a stylised 'Top Ten' on a projected surface.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a sobering end to the week's trading this Friday.

Read more »

Man holding Australian dollar notes, symbolising dividends.
Share Gainers

How a $9k investment in this ASX All Ords stock ballooned to $35,234 in just 3 years!

Shares in the ASX All Ords stock have rocketed even as it’s paid out market-beating dividends.

Read more »

Two colleagues at work looking at a tablet and smiling at a rising share price.
Share Gainers

Why AIC Mines, Bendigo and Adelaide Bank, Patriot Battery Metals, and Vulcan Energy are racing higher today

These shares are ending the week in a positive fashion.

Read more »

Emotional euphoric young woman giving high five to male partner, celebrating family achievement, getting bank loan approval, or financial or investing success.
Share Gainers

Guess which ASX lithium share just leapt 13% on major financing news!

Investors are bidding up the ASX lithium share on the back of major financing news.

Read more »

A neon sign says 'Top Ten'.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX 200 was on fire today, with almost every sector surging.

Read more »

a man sits back from his laptop computer with both hands behind his head feeling happy to see the Brambles share price moving significantly higher today
Share Gainers

Why Aristocrat Leisure, Graincorp, Incitec Pivot, and Patriot Battery Metals shares are rising today

These shares are having stronger-than-average sessions on Thursday. But why? 

Read more »