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.
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.
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.