Now that we are halfway through the calendar year, many investors may be rethinking the kind of ASX 200 stock they need for their portfolios.
The ASX share market has shifted dynamics since the beginning of January. The S&P/ASX 200 Index (ASX: XJO) has climbed less than 2%, but many stocks have outperformed.
Treasury Wine Estates Ltd (ASX: TWE) has seen its shares rise by almost 12% year-to-date, trading at $12.04 apiece at the time of publication.
This strong performance and broker confidence make it a standout ASX 200 stock to consider this June, in my opinion. Let's explore why it is on the rise and what this means for potential investors.
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Why is this ASX 200 stock performing well?
Investors have been lifting the bid on Treasury Wine Estates shares following a number of positive updates.
For one, it recently reaffirmed its guidance for FY 2024. Management is projecting an upper estimate of growth in pre-tax income to $228 million. Recent acquisitions of Frank Family and DAOU have grown earnings, it says.
The company also aims to expand the global reach of its premium Penfolds brand and increase its market share in the US, according to my colleague James.
Earlier in the year, a boost of confidence came when the Chinese Ministry of Commerce announced that China had fully lifted all tariffs on Australian wines. This enabled the company to "commence partnering with its customers in China" and continue its growth route.
Broker confidence
Goldman Sachs is bullish on the ASX 200 stock, too, reiterating its buy rating with a price target of $13.40 in a note last week. This implies a potential return of 12% and nearly 15%, including projected dividends.
The broker is positive on the wine merchant given a more attractive growth outlook and its consumer advantages in the luxury segment.
This might be positive for bottom-line growth, analysts say.
[W]e reiterate buy given the positive delivery of the strategy reset as well as attractive double-digit EPS growth at an attractive valuation. The stock is trading at 1yr forward [price-to-earnings ratio] of 20x. The key catalyst for the stock will now be its June 20 Business Update focused on China.
Goldman also touched on the "continued global expansion of Penfolds, especially post the removal of China import tariffs".
The broker expects nearly 15% sales growth from the company each year until FY 2026. This while "reinventing itself as the number 1 US luxury wine company" after the "growth and margin accretive" acquisitions of Frank Family and DAOU.
What's next for Treasury Wine Estates?
Goldman reckons investors should keep an eye on the ASX 200 stock's upcoming business update, which is scheduled for June 20 and will focus on China.
This update should provide further insights into the company's strategy and potential growth opportunities in the Chinese market. The company outlined its strategy in its interim results back in February.
Analysts also anticipate improvements in return on invested capital (ROIC) over the next two years, further positioning the company for growth.
Top ASX 200 stock for June
Treasury Wine Estates has demonstrated robust performance in 2024, with shares outperforming the benchmark. With the potential for further growth – particularly in the North American and Chinese markets – it could be well-positioned, in my opinion.
Strong guidance, strategic expansions, and broker confidence are three reasons that highlight the company as a top ASX 200 stock to watch this June.
