Morningstar downgrades Treasury Wine
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The news: Morningstar analysts have downgraded Treasury Wine Estates following the run-up in its share price in recent months, even as Australia’s top winemaker is set to benefit from China’s decision last week to scrap tariffs on Australian wine.
The numbers: Morningstar trimmed its rating on Treasury Wine shares by a notch to two-stars, but kept its $11.50 fair value estimate.
The stock has climbed more than 20% so far in 2024 as investors awaited the end of Chinese sanctions. Its shares were 1.38% lower at $12.82 during early trading.
The context: Australia’s top winemaker last week lifted prices on its premium Penfolds brand amid rising export demand. Treasury, which also owns brands such as Wolf Blass and Lindemans, has said it is “well placed” to rebuild its business in China, its largest export market, following the end of the tariffs.
Morningstar analyst Angus Hewitt said in a note that he expects the mid-range wine market to remain ultra-competitive and these products will continue to make up the bulk of Treasury’s portfolio. As a result, he expects pricing pressure to remain in the near term, with the company’s profitability likely to trail global wine leaders.
The source: Morningstar research
