Treasury Wine Estates (ASX:TWE) share price bubbles 12% higher

The Treasury Wine Estates Ltd (ASX:TWE) share price has risen 12% after yesterday's FY21 first half result, stronger management confidence.

| More on:

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 is up 12% at the time of writing.

Yesterday, the global wine business delivered its FY21 half-year result to investors, which showed a heavy profit decline. However, management also said they were more confident about a recovery in some aspects of the business.

Brokers have had their say about the company's result and medium-term prospects.

If you didn't catch the report yesterday, here are some of the main numbers:

Highlights of Treasury Wine Estates' FY21 half-year result

The company said that its earnings before interest, tax, SGARA and material items (EBITS) fell by 23% to $284.1 million and the EBITS margin declined by 3.8 percentage points to 20.1%.

Underlying net profit after tax (NPAT) declined 24% to $175.3 million and underlying earnings per share (EPS) fell 24% to 24.3 cents.

Statutory NPAT declined 43% to $120.9 million and statutory EPS declined 43% to 16.8 cents.

On the positive side of things, Treasury Wine Estates said that retail and e-commerce channels continue to perform at elevated levels across all key markets, reflecting a shift in consumer behaviour towards in-home consumption of well-known and trusted brands.

However, there continues to be disruption to sales channels for higher margin luxury wine and reduced shipments to China because of the Chinese investigations and rules introduced relating to anti-dumping.

Despite the decline in profit, Treasury Wine Estates was still able to reduce net debt by $403.7 million and the board declared a fully franked dividend of 15 cents per share.

Re-organisation

TWE is going to implement a new divisional operating model, aiming at maximising the benefits of a separate focus across brands, rather than regions. Those three new divisions will be: Penfolds, Treasury premium brands and Treasury Americas.

The company also said that it has progressed on key initiatives to deliver a future state premium wine business in the US, including the planned exit of a significant portion of the commercial brand portfolio. Treasury Wine Estates also said it's going to explore the divestment and exit of other non-priority brands, operating assets and leases as it focuses on growing its premium brand portfolio to drive growth in the region.

Growing management confidence about re-allocating products

The company has been working on a response to the Chinese measures. TWE has increasing confidence about its plans for re-allocating its Penfolds Bins and Icon range from China to other markets.

It's expecting to continue to engage with its customer and consumer base, with modest benefits to commence towards the end of FY21.

Broker thoughts on TWE

Morgans said that the report was better than it had expected thanks to the domestic market and Asia. The broker also pointed to an improving balance sheet and good cashflow. It said it would buy TWE shares if the share price were to significantly decline. It increased its price target to just over $11.

However, Citi wasn't really convinced. It was impressed by the Asia result considering the China difficulties, but first half conditions are expected to continue in the second half. Citi still considers TWE shares as a sell, with a price target of $8.60.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

Young girl drinking milk showing off muscles.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a great end to the trading week for ASX investors today.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Share Gainers

3 ASX 200 stocks smashing the benchmark this week

These three ASX 200 stocks are leading the charge this week. Here’s how.

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Why A2 Milk, EOS, GQG, and Mineral Resources shares are racing higher today

These shares are ending the week strongly. But why?

Read more »

A man wearing a red jacket and mountain hiking clothes stands at the top of a mountain peak and looks out over countless mountain ranges.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another disappointing day for ASX investors this Thursday.

Read more »

two men smiling with a laptop in front of them, symbolising a rising share price.
Share Gainers

Why Pinnacle, PWR, Race Oncology, and Vulcan shares are flying today

These shares are having a good session on Thursday. But why?

Read more »

A beautiful woman holds up one finger with one hand and has her hand on her waist with the other as she smiles widely as though she is very pleased about something.
Share Gainers

Why Boss Energy, Emeco, Mineral Resources, and Plenti shares are pushing higher today

These shares are having a good time on hump day. But why?

Read more »

Three small children reach up to hold a toy rocket high above their heads in a green field with a blue sky above them.
Share Gainers

3 ASX 300 shares going gangbusters on Wednesday

Investors are bidding up these three ASX 300 shares today. But why?

Read more »

Man raising both his arms in the air with a piggy bank on his lap, symbolising a record high.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a huge Tuesday for ASX shares, with the index resetting its record high.

Read more »