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Treasury Wine Estates earnings preview: is the worst over yet?

For the past two years, Treasury Wine Estates has done its best to retain its position in the absence of the Chinese market.

Source: Bloomberg

Treasury Wine Estates (ASX: TWE) release date:

Treasury Wine Estates is expected to release its earnings report on Thursday, August 18, 2022.

Treasury Wine Estates earnings expectation:

  • EPS: 0.442 (13.6% yearly decline)
  • DPS: 0.29 (3.5% yearly increase)

Treasury Wine Estates earnings key watch:

Treasury Wine Estates' earnings report for the first half of FY22 was bittersweet with the company reporting the EBITS declined 7% to $262.4 million while a 28% increase (excluding Australian COO sales to Mainland China) provided some comfort to shareholders.

In 2020, the Australian government demanded an international inquiry into the origins of COVID-19. This ridicule enraged the Chinese government and they swiftly placed punitive tariffs on specific Australian imports. Unfortunately for Treasury Wines, their premium product line was on the tariff list, and China was the company's largest consumer.

Since then, its stock price dived from $18 in early 2020 to around $8 in November 2020.
For the past two years, Treasury’s management has done its best to pivot away from the world’s largest country by diversifying its markets. This has come with the acquisition of US business Frank Family Vineyards in late 2021, a key step to create a new pillar of growth for the US business and more importantly, accelerate expansion outside of China.

The strategic moves, driven by the improved global distribution network for Penfolds, have ignited the hope that the luxury and premium brand will manage to retain its strong position in the absence of the Chinese market.

During the 1H22 interim result announcement, TWE’s Chief Executive Officer, Tim Ford commented, 'We have shifted our focus from a mindset of "recovery and restructuring" to one of "growth and innovation." '

It is no doubt a positive sign that a new era is beginning for the company.

Over the last three years, earnings at TWE have declined by an average of -6.53% annually. This is worse than the industry average growth of 6.49%. For fiscal years 2022 and 2023, analysts are estimating that average annual growth will increase by 2.13%.

Source: Commsec

Technical analysis

The price of Treasury Wine has recently taken a breather from its peak at the level of $12.5 which is poised to be a massive resistance zone for the price. However, the price remains glued to the ascending trajectory with imminent support at $12.1, only an inch away.

Treasury Wine Estates daily chart

Source: IG

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