UBS has downgraded Treasury Wine Estates to ‘sell’, citing a deteriorated risk-reward scenario as industry headwinds converge with company-specific challenges. This assessment comes despite the company’s share price already having fallen sharply this financial year. Treasury Wine Estates is a global wine company that owns a portfolio of brands, producing and marketing wines from vineyards in Australia, the United States, and Europe. Its best known brands include Penfolds, Wolf Blass, and Beringer.
UBS analyst Shaun Cousins highlighted increased difficulties for both Penfolds and the Americas division, leading to earnings forecasts below market expectations. Cousins pointed to a challenging industry landscape with declining alcohol demand among younger consumers, as wine loses market share to ready-to-drink beverages and spirits. Treasury Wine Estates shares have already fallen 29 per cent this financial year, but UBS believes this decline doesn’t fully reflect the magnitude of the challenges.
Specifically, UBS flagged a build-up of Penfolds’ grey-market supply in China, estimating approximately 0.4 million cases, equivalent to around $215 million in FY25 net sales revenue, sitting as excess inventory with distributors. This inventory overhang suggests weaker local demand and diminishes the growth potential from reallocating volumes into new markets. Furthermore, execution in the US was described as mixed, with strong performance at DAOU and Matua brands offset by weaker results from 19 Crimes and other luxury brands.
Consequently, earnings forecasts were revised downward, with UBS reducing FY26 and FY27 EPS estimates, positioning them 5 per cent and 13 per cent below the Visible Alpha consensus, respectively. The broker also anticipates no dividend payments from the first half of FY26 through the second half of FY27 due to gearing. UBS lowered its valuation target to $4.75 per share from $5.25. In afternoon trade, Treasury Wine Estates shares were down 9.1 per cent following the announcement.
