RBC Capital Markets has maintained its Outperform rating on Treasury Wine Estates Ltd and a target price of A$11.00 per share, despite the winemaker trimming its FY25 earnings guidance and announcing the loss of a major distributor in California.
RBC analyst Michael Toner acknowledged the reduced FY25 earnings before interest, tax and SGARA (EBITS) guidance – down 1.3% from A$780 million to A$770 million – but noted that market consensus had already drifted to around A$777 million. Toner highlighted a lack of commentary on FY26 guidance, particularly for the Penfolds division, where TWE is targeting 15% annual EBITS growth for FY26 and FY27 compared to his own forecast of 9.8%. He also flagged the potential impact of the California distributor exit in FY26 as “less certain”.
Key distributor gone
Treasury Wine Estates informed the market that Republic National Distributing Company (RNDC) will cease its California operations from September 2, 2025. RNDC services 25 US states and accounts for approximately 25% of Treasury Americas’ net sales revenue and 10% of group net sales revenue.
The company said RNDC’s exit from California will not affect FY25 earnings and reaffirmed RNDC’s ongoing commitment to its portfolio in the other 24 states.
TWE is “confident” of being able to “strongly to transition to a new route to market in California in the near-term.”
In explaining the downgrade to earnings guidance, TWE cited “economic uncertainty and weaker consumer demand”, which has recently affected the sub-US$15 wine category in the US.
Shares in Treasury Wine Estates was trading at A$8.06 around 1pm.