Treasury Wine Estates Ltd (ASX: TWE) shares are changing hands at $7.91 a piece at the time of writing, up 1.17% for the day so far.
The share price has sunk 35.51% over the past year, as a structural shift in market demand, operational headwinds, and news of its CEO's exit dampen investor confidence.
But the company reported its FY25 financial results yesterday, giving investors some reprieve. The Australia-based global wine company posted a 7.2% year-on-year increase in its net sales revenue while its EBITS (interest before interest, tax, SGARA and material items) jumped 17%, improving its EBITS margin by 26.2%.
The growth was primarily driven by strong growth in Treasury Wine Estate's Penfolds business, led by the return of demand for Penfolds Australian range from China and broader Asia.
Investors appear to be satisfied with the result. Treasury Wine Estate shares have risen 2.4% since its announcement.
Broker Macquarie Group Ltd (ASX: MQG) also revealed what it thinks of the company following the announcement.
Macquarie's stance on Treasury Wine Estate shares
In a recent note to investors, Macquarie confirmed its neutral rating on the stock and $8 target price. That represents a potential 2.43% upside for investors over the next 12 months from the time of writing.
"Valuation: DCF-derived target price unchanged at $8.00, with outer-year Penfolds upgrades offsetting near-term reductions in other segments," the broker said in its note.
"Retain Neutral. We believe the share price has found a floor, though with downside risk to consensus earnings and an unknown strategic outlook, we see limited positive catalysts to drive a re-rate."
Treasury Wine Estate produced a solid result on balance
While Macquarie kept its stance on the stock unchanged, it also acknowledged that Treasury Wine Estate's FY25 earnings were solid and its EBITS was in line with guidance. The broker sees this as relatively positive given previous downward revisions.
"Positively, Penfolds delivered EBITS growth of ~14% y-y which was ahead of the low double-digit guide. However, the remaining components of the portfolio remain under pressure, with Treasury Americas organic NSR in -5% y-y and Treasury Premium Brands NSR -7%, translating to a ~30% decline in EBITS (constant-FX basis)," it said.
Going forward, consistent with the update in June, Treasury Wine Estate expects low to mid-double-digit EBITS growth in Penfolds in FY26E.
"This is despite softness in depletion through Jun-25 and Jul-25, following imposition of more stringent Chinese Government policy on alcohol. Management has not shifted guidance given: i) Lack of clear data in key consumption periods (with Mid-Autumn Festival in Sep-Oct noted as a key event); ii) historical tendency for demand to recover following similar events; and iii) ability to pull other levers (incl. focus on different channels and/or other geographies)," Macquarie said.
The broker sees downside risk to guidance and is forecasting 6% growth year over year based on its 'crush model'. Treasury Wine Estate management also reiterated a 15% growth target in FY27, but the broker is more conservative and expects annual growth of around 8% year over year.
