Treasury Wine share price on watch after FY 2020 guidance downgrade

The Treasury Wine Estates Ltd (ASX:TWE) share price could come under pressure on Wednesday after it downgraded its guidance for FY 2020…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Treasury Wine Estates Ltd (ASX: TWE) share price could come under pressure on Wednesday after the release of an after-hours update on its first half performance.

What did Treasury Wine Estates announce?

After the market close on Tuesday, Treasury Wine revealed that its performance in the first half has been impacted by challenging conditions in the U.S. market.

As a result, the wine company only expects to report a 5% increase in net profit after tax to $229.2 million and a 6% lift in EBITS to $366.7 million for the first half.

This has fallen short of management's expectations, which has led to a downgrade to its full year earnings guidance.

Treasury Wine now expects EBITS growth of 5% to 10% in FY 2020. This compares to its previous guidance of 15% to 20% growth. After which, management now expects EBITS growth of approximately 10% to 15% in FY 2021.

What happened?

The company's CEO, Michael Clarke, explained: "The early announcement of our first half results, which remain subject to audit review, reflects the fact that we slightly missed our 1H20 EBITS versus our own expectations and based on our revised full year forecast our growth rate in F20 will be lower than previously guided. This is driven primarily by underperformance in our US results in the first half and is expected to continue through the second half."

One of the reasons for the underperformance was unexpected changes in its Americas leadership, which resulted in a loss of execution momentum.

In addition to this, unfavourable wine market dynamics in the United States also weighed on its performance. These market dynamics have prevented Treasury Wine from recovering higher U.S. Luxury and Australian Commercial costs. 

Mr Clarke concluded: "We are very pleased with our performance across Asia, ANZ and EMEA, all markets in which we are executing well and continuing to deliver improving financial returns for our shareholders. While current conditions in the US wine market are challenging, we are confident that we will re-gain momentum under the new Americas regional leadership team and return the region to growth once the market impacts subside."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Broker Notes

These ASX 200 shares could rise 50% to 60%

Brokers believe these shares could deliver big returns for investors.

Read more »

A girl is handed an oversized ice cream cone with lots of different flavours.
Best Shares

8 ASX All Ords shares that tripled in value in FY25

Just 8 out of the 500 companies making up the ASX All Ords achieved share price growth of 200% or…

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why DroneShield, Gentrack, Metals X, and Northern Star shares are tumbling today

These shares are ending the week in the red. But why?

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »