What to expect when Treasury Wine (ASX:TWE) uncorks its results next week

Next week the Treasury Wine Estates Ltd (ASX: TWE) share price will come into focus when it releases its half year results.

Ahead of the release of Wednesday 16 February, let’s take a look to see what the market is expecting from the wine giant.

What should you expect from Treasury Wine’s half year results?

At present, the market consensus estimate is for the Penfolds owner to report revenue of $1,251 million and EBITS of $259 million for the first half of FY 2022. This will be down 11.3% and 7.9%, respectively, over the prior corresponding period.

According to a note out of Goldman Sachs, while it is still expecting a decline year on year, it believes the company will outperform the market’s expectations.

On the top line, the broker is forecasting a 7.7% reduction in revenue to $1,301.9 million. This comprises a 2.8% decline in Penfolds revenue to $444.5 million, a 13.5% decline in Americas revenue to $440.5 million, and a 6% fall in Premium Brands revenue to $416.8 million.

Goldman also expects Treasury Wine’s EBITS to come in ahead of consensus estimates at $265.3 million. This represents a 6% decline over the prior corresponding period and is largely being driven by weaker earnings from its Penfolds business, which it expects to offset strong earnings growth in the Americas segment.

What else should you watch out for?

Goldman has named three key items that it will be watching out for. These are Penfolds sales outside of Australia, the Americas business post commercial transition, and its inventory.

In respect to Penfolds, it explained: “This is as a key indicator of longer-term progress, in our view. Management noted strong growth on this front during the FY21 results. The sustainability and acceleration of this progress will be key towards meeting longer-term expectations for the brand.”

As for the Americas, it commented: “The sustainable growth in Americas in the focus portfolio, following the divestment of commercial brands and acquisition of FFV, will be another key focus area for us in the 1H22 results.”

“We expect inventory to remain elevated at >70% of sales till end of FY23. While intake has been managed to take into account the shift in sales mix in Asia following the closure of the Chinese market, we expect intake to be an indicator of the longer-term outlook for sales growth,” Goldman concludes.

Is the Treasury Wine share price in the buy zone?

Despite expecting the company to outperform expectations during the first half, Goldman only has a neutral rating on the Treasury Wine share price.

Though, it is worth noting that its price target of $11.80 implies decent upside from current levels.

The post What to expect when Treasury Wine (ASX:TWE) uncorks its results next week appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia 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.

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