Treasury Wine Estates Ltd (ASX: TWE) shares are jumping on Tuesday morning.
At the time of writing, the wine giant's shares are up 6% to $8.57.
Why are Treasury Wine shares jumping?
Investors have been buying the company's shares today after the Penfolds owner released an investor update before the market open.
According to the release, Treasury Wine has reaffirmed its FY 2025 earnings before interest, tax, and SGARA (EBITS) guidance at approximately $770 million. This represents a 17% increase on the prior corresponding period.
The company's luxury segment continues drive its growth. The flagship Penfolds brand is expected to deliver low double-digit EBITS growth in FY 2025, driven by a strong performance in Asia, particularly following the re-establishment of the Australian country of origin portfolio in China.
In addition, Treasury Americas is expected to deliver solid EBITS growth this year. This is thanks to the DAOU Vineyards business, which is anticipated to contribute low double-digit net sales revenue growth. This aligns with its medium-term targets.
This is offsetting weakness elsewhere in the Treasury Americas business. Management notes that economic uncertainty and weaker consumer demand have led to declining wine consumption trends. This is especially the case in the sub-US$15 price segment. This softness is more pronounced in the premium portfolio, with brands like 19 Crimes underperforming expectations.
FY 2026 outlook
Looking ahead, Treasury Wine plans to transition to a luxury-led divisional operating model from FY 2026. This will see the introduction of a new global premium division, Treasury Collective.
In addition, management advised that it expects continued EBITS growth in FY 2026, driven by the strength of its luxury brand portfolio, led by Penfolds and DAOU.
Penfolds is projected to achieve low to mid double-digit EBITS growth, reflecting increased investment in sales and marketing in Asian markets.
Share buyback
Potentially giving Treasury Wine shares an added boost today is news that the company is planning to announce an on-market share buyback.
Management advised that it expects to announce a share buyback for up to 5% of issued capital as part of its FY 2025 results update in August. This will be executed in line with its longstanding capital management framework, maintaining leverage at approximately 2.0x through the year. It will be supported by its expected free cash-flow generation in FY 2026.
Given how much Treasury Wine shares have fallen over the past 12 months and the low multiples they trade on, this seems like a smart use of its cash.
